Add to that it's all being done by an ex-convict entrepreneur and it looks to me like the only reason this is a story is because it's a story. He did a good job hyping it.
I don't think, after a very cursory review of some of the reports on this E-cat stuff, that yours is a fair summary.
He didn't just do a good job "hyping" it, it seems, but a good job selling it too. I don't mean selling in the exchange of goods/services sense but he appears to have won some high profile support.
For example:
"Rossi has licensed the technology to a start-up called Ampenergo. Though new, the company has credentials; one of its founders is Robert Gentile, Assistant Secretary of Energy for Fossil Energy at the US Department of Energy (DOE) in the 90's." (Wired, http://www.wired.co.uk/news/archive/2011-10/06/e-cat-cold-fu...)
"Together with Sergio Focardi, professor emeritus at the University of Bologna, and Giuseppe Levi, a professor in the university’s Department of Physics, the trio claimed a low-energy nuclear reaction device that produced extraordinarily large amounts of excess heat." (from a New Energy Times article strongly criticising Rossi, http://blog.newenergytimes.com/2011/08/07/rossis-scientific-...).
And again:
"On March 29, two Swedish professors went to Bologna, expenses paid by Rossi, to see Rossi's device in action. Sven Kullander is professor emeritus at Uppsala University and chairman of the Swedish National Academy of Sciences Energy Committee. Hanno Essén is associate professor of theoretical physics and a lecturer at the Swedish Royal Institute of Technology and was the chairman of the Swedish Skeptics Association until April, when he declined to run again. On April 3, they wrote a report endorsing Rossi's claim." (New Energy Times again, http://newenergytimes.com/v2/news/2011/37/3705report3.shtml)
Clearly there's a bit more to this than just a convict hyping some vapourware.
I'm not saying you can't fool professors of physics however.
From the little I've read it seems that there is an assumption being made (see http://newenergytimes.com/v2/news/2011/37/3705report3.shtml, "Steam quality ...") that all of the water is being ejected as dry steam when it is probably wet steam, steam mixed with a fog of droplets of water. This error leads to vastly inflated calculations for the emitted energy.
However, that wouldn't explain the current ½MW demonstration ...
It's going to be interesting to see how this one breaks down.
