The M/G is ALWAYS connected to the ICE through the PSD. It is a very rare instance where the ICE motive power is not partially routed through the M/G, and this does have transduction losses. This is the cost of keeping the ICE within a much better efficiency range than other hybrid designs at low power demand states.

R2-E2, 2G Prius.
Highway/City/Husband/Wife MPG: 56.5, as of 12/2005, 26K miles

Jac Nasser, Ford President: "We are planning to launch a hybrid version of
this car [P2000] within this year [1998]. We will also make FCEV available in
2004."