One aspect of photosynthesis that has always struck me as odd is the poor efficiency of that reaction: about 1%. This inefficiency is embarrassing enough, but when you consider that it is the result of 3.5 billion years of evolution, it becomes abominable. While research is being done to try and increase it, I think that the eons that nature has had to work on the problem pretty much guarantees us failure. For whatever reason, plants started out with an inherently poor reaction and have optimized it about as much as they can. Evolution can only build on what was there before. It is constantly working with legacy systems, and can never completely escape what was there before. What is really needed is a quantum leaps - the development on an entirely new photosynthetic mechanism, but that is far beyond our current capabilities and will be for the foreseeable future.
As a result, any efforts that we put into the development of biofuels will be limited by those same inefficiencies. Nobel Prize winner Hartmut Michel has a short editorial entitled "The Nonsense of Biofuels"(open access) which details the inefficiencies that I just described. He is not completely against the idea of only harvesting food from plants, but instead proposes that "[t]he best use of the biomass lies in its conversion into valuable building blocks
for chemical syntheses." This is the same idea that is indirectly echoed in another recent editorial entitled "Alternative feedstocks: a continuing trend in the polymer industry?" (open access). I say indirectly as this latter editorial advocates strongly that refineries for biofuels will be developed on a size and scale comparable to existing petroleum refineries, all the while recognizing that in the refineries, "[b]iomass...loses all of the chemical complexity that is inherent in bio-derived molecules."
I may have a biased perspective, but this does seem to be by-and-large the options that are being explored by industry. News of biobased chemical developments and investments in the corresponding plants seems to be dominating that of biobased fuels, so it seems that at least for now, we are moving in the right direction.