Real-world fuel economy of the HCH is within a few MPG of the Prius anyway, at least according to the GreenHybrid database. Honda's suggested the 2006 will have another 20 horsepower and 6% better fuel economy. If the pricing stays similar, it will be darn close to equal to Prius FE in real-world driving while having a lower price than the Prius.

As for their overall strategy, Honda has in the past said that Toyota's talking out the side of their mouth with all this fuel economy stuff since Honda's corporate fuel economy average is much higher than Toyota's anyway. This is largely due to some of Toyota/Lexus' top sellers being V8 models of course, and Honda does not sell V8 vehicles of any sort.

IMHO, it only makes sense to apply all your most advanced technology to the largest market offerings such as the Civic and Accord since by spreading the R&D cost over a large number of units, you lower the cost per vehicle to develop the technology. That can make it easier to use that technology on specialty models like the hybrids because it's already "paid for" by the mass-market version.