The big time problem with hydrogen is the fact that it does not naturally occur. Hydrogen is not an energy source, but an energy carrier...just like electricty. Many people get these two confused. For example, your dryer may run off of electricity, but it's energy SOURCE could be coal, nuclear, hydro-electric...whatever the electric company uses in your municipality.
Hydrogen can be made in one of two ways. One way is to extract it from an existing hydrocarbon fuel, like gasoline, natural gas, etc. This process is particularly inefficient, and still results in pollution, as the other components in the fuel are discarded (the carbon!) The other way to produce hydrogen is to electrolizise water. This too, is an inefficient process, as a great deal of energy goes in simply heating up the water when the electricity is passed through it. This method however does not produce much pollution where it's done. It does however require electricity...yet another energy carrier.
Perhaps the electrolisys method is the best way to go right now. Battery electric vehicles approach the 90% efficiency range with the electricity they use. Even if the electricity comes from a fossil-fuel power plant, it's still rather efficient, because the power plant can be upwards from 50%-60% efficient in converting the fuel to electricity. A gasoline automobile engine is in the 25% range. Like you mention however, the battries are the bad point, becaue they have limited range, and must be manufactured and disposed of. Lead-acid batteries are the most common battery of choice for most home-brew electric car people. Although they are heavy, they are cheap, and can provide lots of power. Oddly enough, despite the fact they contain lead, they are not that bad for the environment...they MUST be recycled, and recycling them is not hard.
Still, hydrogen fuel-cell vehicles may be the winner here because it will allow the vehicle to achieve the same efficiency ratings (if not more) as a battery-electric vehicle, and because hydrogen is produced using electricity, it can be rather efficient due to the power plant's efficiency. I don't think hydrogen though will really take off as a viable fuel until we can move our electricity production to renewable and "home grown" sources of power, like wind, solar, hydro, and even nuclear, and off fossil-fuels. This, however, stands a much greater chance than trying to make gasoline home-grown.
IMHO however, it's not what we drive, or where it's power source comes from, it's how often we do drive that matters the most. Automobiles get ZERO miles to the gallon when they are sitting still in traffic congestion, which is a major part of most American cities. There are simply too many vehicles on the road. It all stems from our poor development stratigies, which center around automotive transportation. We don't design communities where we can walk to stores and shops anymore, and we certainly don't factor in mass-transit either. As cities sprawl more and more away from their core, with low-density zoning, it generates more automotive traffic as people must drive longer distances to do their daily routines. While development is inevitible, we must think about the future, and I don't forsee the personal autombile being a viable source of transportation in the future...not only because of fuel costs and pollution issues, but because getting anywhere in one will be too much of a chore, and too slow and inefficient.
More fuel is saved by the SUV owner that takes the subway to work, than the Prius owner that drives to work!
