I saw something early last year on ABCTV on genetically modified yeast (Saccharomyces cerevisae) which would ferment the pentoses ... the C4 sugars ... to alcohol (C4 's are found in grasses & weeds).
In searching for same found these links...
News in Science - GM bugs may boost biofuel production - 18/10/2006
This link outlines the research behind the use of lignocellulose (and the C5 & C6 sugars) for ethanol production ... from products like sugar-cane bagasse.
http://www.ausbiotech.org/UserFiles/...7_BIOFUELS.pdf
This is a presention/interview with the co-founder of the Microbiogen developmental research company, Ryde ... at a sitting of the "Future Oil Supply Inquiry" in July 2006
Senator Barnaby Joyce