ORIGINAL: Kris^
The only problem with this entire line of thinking is this:
In order to produce power from an internal combustion engine, you must have an expansion cycle of some sort, which is caused by the heating of the expanding medium (in this case air/fuel). Once a substantial expansion has taken place, no more power is made, and power is actually absorbed as contraction starts to take place because of cooling. To merely raise an engines temperature tolerance will not result in 100% efficiency of operation, though it will increase efficiency slightly. IN order to have a continuous cycle of energy production, you will always have to remove the heated/expanded substance, replace it with a fresh cool/non-expanded item, and then cause THAT to go through the expansion process.
As long as we are using thermal dynamics and expansion of gasses to produce power, it is going to be impossible to achieve even 50% efficiency. What is needed is a direct matter-energy occurence, with no waste or heat output which would reduce efficiency, such as by turning gasoline directly into electrical energy through a catalytic/voltaic reaction of some sort. That technology, as yet, does not exist, and fuel cells are a long way from being perfected.