lakedude, I am going by the car's own fuel consumption display and by one or two articles I remember reading on it. I'm almost positive I remember the FCD showing the engine charging the battery but not driving the car directly; only the motors were. And I know I've read the advantage to that is the engine can operate more efficiently than it can when driving the car directly, which offsets the loss in energy from generating electricity and using that electricity to drive the car.

See, electric motors are very efficient at any speed, but gasoline motors are not. When you think about it, if you were right about the Prius' drive being inefficient, then it would never ever charge the battery from the engine and would rely solely on regenerative braking, since the energy put into charging the battery will be less than the energy gained back when using the battery for the electric motors.

Furthermore -- and I admit I don't understand much of the physics of this, just the fact that it's what the car does -- even when the engine is directly driving the car, it's also recharging the battery while the electric motors use the battery to drive the car. So some of the engine's power drives the car while the rest is used to generate electricity that then... drives the car. Unlike Honda's hybrids that use only the ICE during high-speed cruising, the Prius and Ford Escape hybrids use the electric motors at all times.