This is just a Bush administration gift to their oil industry friends. Hydrogen powered cars in sufficient numbers are at least decades away. And you still need energy to produce the hydrogen if hydrolysis is used.
The first rule the administration could and should make, by fiat, is to stop exempting light trucks and vans from the CAFE requirements. The average miles per gallon of all vehicles on the road would pretty quickly rise by a considerable fraction, perhaps 15-20%.
We could just let the market forces do their thing. When gas hits $3, the cars and trucks will change. Enjoy the cheap energy while it lasts (40% of the price is tax anyway). Most of the public won't pay 10c for a little more fuel economy but thousands for more performance. Automakers know this.