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The problem with this approach is that it still gives off carbon dioxide. On the other hand, since it's three times more efficient than simply burning the fuel, it only gives off a third as much CO2 for a given amount of work. It may also reduce other unwanted by-products of burning, like carbon monoxide.

As other posters have pointed out, the alternative hydrogen storage methods currently available also have problems, such as high volume, high weight, high complexity, and so on.

Here is an excellent presentation I found on the subject of hydrogen storage:

(PDF:) Hydrogen. Fueling a Cleaner Future.

One of the most interesting alternatives mentioned in the paper was the use of carbon nanotubes to provide high-density hydrogen storage. Here is another article on that subject:

Singapore Physicists Report High Hydrogen Storage Capacities in Alkali-Doped Carbon Nanotubes

Hydrogen and Fuel Cell Letter, June 1998
Shell, April 1999
Time, January 2000
National Hydrogen Association, Spring 2000
Red Herring, July 2000
Fast Company, October 2000
ENN, December 2000
BBC, December 2001
etc.

There's an article from '97 describing Chrystler's idea for the hydrogen cell fuel car. Interesting to compare their predictions and the result four years later. Quite thought-provoking.

You can read about the technicalities of the fuel cell system at The Hydrogen & Fuel Cell Letter web site.

You can read about the technicalities of the fuel cell system at The Hydrogen & Fuel Cell Letter web site.

Putting Hydrogen tanks on aircraft would make them very large and increase drag on the aircraft. There's been a lot of research into better storage methods for hydrogen for use in cars.

From The Hydrogen and Fuel Cell letter:
In storage, DoE funded 21 projects. Many were discontinued:
magnesium hydrides (Florida Solar Energy Center, Energy Conversion Devices, Texas A&M), fullerenes (Oak Ridge National Laboratory), chemical hydrides (NJ Transportation Department), hydride slurry (Tecogen), phase change hydride (A.D. Little), non classical polyhydrides (Hawaii Natural Energy Institute), carbon foam (Sandia), and carbon aerogels (Lawrence Livermore). Others are continuing, such as fullerene hydride (MER), nanotubes (NREL), and some which seem promising such as liquid hydrogen (Lawrence Livermore - "completing certification of a 34.5 MPa tank for both liquid and gaseous hydrogen"), composite tanks (Lawrence Livermore, Thiokol, Johns Hopkins - "successful at up to 11.3% by weight"), and alanates (Hawaii Natural Energy Institute, Sandia - "successful at up to 5% by weight").

Of course, we could also develop ways to store jet fuel in airplanes that won't leak if a plane crashes.