Interesting read. There are a lot of neat little projects starting up because of the automotive X-prize. I've heard a few other people suggest that a Kubota diesel in a small car would be a great way to may a super-efficient car. Seeing the results this project got when running it in their rusted-out wagon (38MPG), I'm not so confident that it will be even close to possible to get to 100MPG with that engine. At least, not while seating at least two people in something that at least vaguely resembles a car.
I'd find it far more likely that a small Crower six-stroke engine would be more likely to reach the goal. Too bad no one actually makes Crower six-stroke engines.
I don't believe that any amount of aerodynamic improvement will make that motor good for 100MPG in mixed driving. It may get close to that on the highway, but it's too big for all of the idling city driving requires. An engine half that size setup as a series hybrid in a more aerodynamic shell could likely do it however.
The key, IMO, is to never allow the motor to idle. It should either be generating useable power for motion or charging batteries, otherwise it should shutoff when no power is needed. Any setup that fails to do that simply isn't going to get there without serious compromises in performance or efficiency.