that is true, any process that burns has energy loss in the form of heat, fuel cells do not have that problem because there is no heat generated.

My fuel cell tech knowledge is a bit rusty, but from what I remember a potential (voltage) difference is obtained between the oxidizing hydrogen and oxygen. I cant quite remember how fuel cell technology keeps the gases aligned as they form water. One misconception that a lot of people have about Fuel cells is that it is a "new" (and therefore unstable) technology... This is flat out wrong. Fuel cells were first discovered by some guy whos name i cant remember in the 19th century, but weren't put to proper use until NASA started using them in the space program in the 60's.

One issue with fuel cells is where you get the hydrogen, which is a very common element, but not often seen in its pure H2 form. That same issue appears if you plan on burning hydrogen as well. Which is why the solar powered hydrogen generators look so interesting to me.

Biodiesel is definitely preferable to fossil fuels, but they still have the same amount of carbon emissions, though fewer pollutants. Which is why I think the long term solution should be hydrogen, preferable fuel cell based.