da_zman20, you are correct on how a hybrid works, but wrong on your assumptions on the engine portion of it.
As a little back info, since most people think that women don't know much about the mechanical workings of engines, my family drag races as a hobby. I have also rebuilt an engine myself, and am constantly learning about them. So, I have a pretty good grasp on it.
Now, there are a couple very basic things to keep in mind when talking about the fuel efficiency of cars:
1) manufacturers lie. They test under optimal conditions when reporting fuel efficiency. Read the real tests that car magazines report. (that, Kona, is where I get my information on how the hybrids *actually* compare to the diesel Jetta, which I know from experience gets 49 to 50 mpg consistently, and is a larger car than the hybrids, but that is something you need to read about yourself from other sources than the manufacturer).
2)There are basic concepts when propelling a mass. It takes the same amount of horsepower to propel 2,000 pounds at 60mph no matter what engine you are using. So, a one cylinder engine still needs to make as much horsepower to propel that 2,000 car as a 6 cylinder. So, it is actually under more load, and will run at a higher RPM and probably need a higher compression ratio to do the same job. Simple concept- 13 gallons of gas burned pretty much equals the same amount of emissions no matter how it is burned (depending on the catalyst technology used...but that is a different topic of conversation). So, if a hybrid in real life trials gets 50 mpg, and so does the diesel, they are putting out the same amount of emissions.
Diesels use a much less refined product than gas engines do (that is why it usually costs less than gas). The compression is different in the engine, as is the ignition system (glow-plugs versus spark plugs). People just still have the old memories of out of date diesel engines and assume that since the emissions smell different that they are worse. Catalytic converters have come a long way.
I don't drive a Jetta any more, though. I had a fight with the car, and it lost. It decided to gel its fuel (bad fuel system design) on Christmas night and stranded my whole family (including my daughter who was a baby at the time) 35 miles from home. (Dependability when transporting my child means more to me than fuel efficiency). I also would not drive a hybrid for the same reason. They are smaller than just about any other car out there, which doesn't feel safe when on the expressway with my child. They also do not have much interior room for families. The technology is a long way from being main stream.