Have you seen Pempek's FP3 engine? FP3 stands for Free Piston Power Pack. It seems like a somewhat similar compact, simple solution. No crankshaft, no connecting rods, passive and electronically controlled valves (no valve train), no starter needed, perfect compatibility with hybrid systems....
Pempek is a company with only 3 employees, but they've managed to get 24hp per pack (2 cylinder), with an expectation of 34hp achievable. Their estimates say that if they get 34hp, they can double the mileage of a Prius without losing power or requiring a plugin (its a very compact, small, and light engine).
They're also working on a diesel design (diesel being simpler to implement) that is projected to produce 400HP, and a 600HP version that should be 1/7th the size of a conventional diesel of similar output. Their director says "If we're successful, it could basically sit in the crankcase of a diesel V8 with the same output"...
Lots of potential, but until recently, not much incentive in terms of $$$ to go out and nail fuel efficiency....
I just took a look. What is it with Aussies and cool engine designs? The concept looks like some Stirling engine designs I've seen. The website is down so I only looked at one cached page.