The corn ethanol is still cheaper to produce sadly.... Even though it is a horrible fuel source.
This is why we need more diesel vehicles on the road. Biodiesel performs just as well as regular diesel (better even under some conditions) and is cleaner to use and produce than ethanols. I am really looking forward to when Chevy (hopefully) brings their diesel version of the Cruze to the US market next year, and hopefully Ford follows suit with a small duratorq. I really think they are going to change consumers minds over here and mainstream small diesel vehicles. The ones that follow the little v-dub diesels are just too much of a small cult following.
People still think about the loud, dirty, unreliable, underpowered NA diesels of the 80s. The average consumer needs to see one of these new, quiet, powerful yet efficient diesels that we have been selling across the pond and the guys who buy the little German cars already know all about. Only problem I see with it is the fact that American car buyers don't know how to treat turbocharged vehicles.
I agree that corn ethanol is not a good replacement for petroleum. This is a good example of the fallacy of modern economic thought - that resource scarcity is not a problem because substitutes are always found. We have $100/barrel oil and no substitute in sight with the same energy density, EROEI, portability, flexibility etc.