Something that hasn't been mentioned much so far is that
Brazil has been using Ethanol for years. I had forgotten about that fact until I just saw it above. Apparently it's cleaned up the air quite a bit in it's cities (Californians take note, high octane and clean air!).
As far as the economics are concerned, I kind of discount the arguments on both sides a bit. But if it is such an incredibly bad idea, I would think that we would have seen some evidence of that in Brazil over the last 20 years -- and it just doesn't appear to have happened. The big hurdle is that there really isn't any infrastruture in place, and as long as there isn't infrastructure, the economics won't look good.
But if ultimately the technology can reduce our (and by extension the world's) dependancy on middle-eastern oil, it can only be a good thing. I think it's a pretty safe conclusion that if we were to deflate middle-eastern economies of their oil revenues some, that the amount of money flowing into the purchase of AK47's and funding of bomb-makers in the area will quickly dry up.