The value is overwritten by the value binding, please have a look at this fiddle http://jsfiddle.net/rniemeyer/TeFAX/
ko.bindingHandlers.valueWithInit = {
init: function(element, valueAccessor, allBindingsAccessor, context) {
var observable = valueAccessor();
var value = element.value;
observable(value);
ko.bindingHandlers.value.init(element, valueAccessor, allBindingsAccessor, context);
},
update: ko.bindingHandlers.value.update
};
Also you must wait until the value is set by the browser
setTimeout(function() { ko.applyBindings(viewModel); }, 15);