No perfect materials
There are no perfect thermal insulators. So does this affect how efficient an engine can be?
Technically yes, but practically no.
Consider electric motors. No perfect insulators or perfect conductors. Add Friction. Yet electric motors typically run over 95% efficiently. How inefficient are they? Put your hand on one, see how hot it is. Hotter it gets, the less efficient.
Why? Because even though energy transformation always adds up to 100%, "loss" amounts to conversion to an undesired form of energy. When a ball bounces, it gives off heat and sound, and does not bounce back as high. When two cars collide, they don't bounce off at equal speeds in the opposite direction. The energy is absorbed in rearranging the materials the cars are made out of.
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Is it realistic to expect Heat Engines to be as efficient as electric motors?
Yep. No question.
Consider this. Electric motors primary means of loss is heat, due to resistance, insulation loss, friction, and magnetic heating.
Now consider the worst engine on the face of the Earth, in terms of efficiency. The internal combustion car engine. (under 10% at low speeds).
Now, consider a well insulated heat engine, made for a car. No losses related to electricity. Some losses related to physical effects, like "blow by" (the tiny bit of air that leaks past the seal rings). The main "loss" attributed to heat engines is friction.
What does friction do? Converts some work to heat. Lowers the maximum work output of the engine.
But it is a HEAT engine. So as long as the heat isn't discarded into the Pressure Envelope, aka air, the energy of the heat of friction will help power the next stroke. Even though the engine power is affected, a well designed heat engine, capable of heat recycling (ie. is Enclosable), is effectively frictionless when it comes to conversion efficiency.
What about fuel losses, like carbon monoxide? Unburned hydrocarbons get "burned" in the exhaust system, by catalytic converters. Where they make HEAT again. And as we said, its a HEAT engine. An enclosable internal combustion heat engine must recycle its exhaust heat including catalytic conversion heat. No loss.
The mechanisms for loss of most physical devices (think movement) is waste heat. A car engine cannot recycle heat from the tires for example, but heat within the engine system can be well handled. There is no reason to believe heat engines cannot meet or exceed fuel efficiency of electric motors.
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