And here you've stumbled on the one question that I want to ask a national political candidate. Everyone is for alternative energy on both sides, John McCain is for free trade, Obama is for corn subsidies, and everyone wants to lower the price of gasoline. SO WHY IN THE HELL DO WE BLOCK CHEAP SUGAR FROM ENTERING THE COUNTRY AND INSIST ON USING CORN. The answer is special interest sugar farm groups and the importance of corn-growing states in the electoral process. I want them to admit that they know how we can make cheap ethanol without messing with food prices, but choose not to in order to get support from corn farmer states and domestic sugar producers.
Have you read "The Omnivore's Dilemma"? It doesn't really answer the question (although it touches upon it), but it does show the bizarre, vicious cycle that our siding with corn has caused. Moreover, people are now blaming ethanol for the food prices -- a problem that, as you say, can happen if you don't pander to corn and sugar producers.
Semi-rhetorical:
There are only two kinds of organisms I know that break down cellulose into sugars: the bacteria that live inside of termites, and certain types of fungus. And of course there's only the yeasts that turn sugars into ethanol. A question: why aren't there mass-produced, synthetic batches of the various enzymes that break cellulose into starch, starch into sugar (big bag o'amylase/diastase), and sugar into ethanol? Is the process cost-prohibitive or does it have to take place on a micro level? Will nanotechnology impact this, assuming it can get off the ground with our current power crisis?