We know that producing fuels from plant material is probably beneficial from the perspective of carbon dioxide emissions. After all the plants are absorbing carbon dioxide from the atmosphere as they grow rather than just releasing carbon that was trapped in the ground. The overall energy equation is more problematic at least with current feed-stocks like corn, canola and soy. Depending on the processes used, it may well take more energy to grow and process the crops than you get out. As we move toward cellulosic and algae based feed-stocks, the balance should improve dramatically.
However, there is another concern with biofuels. The current crops that are being used require huge amounts of nitrogen-based fertilizers to produce. It turns out that a significant portion of the nitrogen in the fertilizers is actually consumed by bacteria in the ground and then given off as nitrous oxide. Previous estimates had placed this at about two percent of the nitrogen, but new studies place that number closer to three to five percent. Since nitrous oxide has twice the greenhouse effect of CO2, it can offset much of the benefit of using biofuels in place of fossil fuels. Until we can start using feed-stocks that don't require huge amounts of fertilizers (much of which is also produced from petroleum) it may be counterproductive to mess with most current biofuels.
[Source: TreeHugger, thanks to Wyatt for the tip]