In our computer model of a hybrid car, it was best suited for urban driving(no long term freeway jaunts). This partly was because of the dual energy conversion losses that Curtis mentioned. Ideal sizing of the engine was based on the maximum HP required to sustain top speed driving(this is where you need the HP) including the losses. Energy storage devices were then used to improve the driveability as well as recover some of the energy lost in slowing down. Ideally, the engine would run only at wide open throttle and shut down during times when the extra power wasn't needed.
Following the "you have to spend money to make money" idea, you do have to expend energy to make energy. While it may look inefficient at times, overall it should be better.
Another thing you have to consider is that we are at the very beginning with the practical development of hybrid cars. Technology has advanced quite far since I worked on concepts almost 40 years ago but nothing speeds up the development like actual working vehicles. As these vehicles develop more advancements will occur to overcome problems. Selling vehicles like this are part of a long term development process.