<< There are two basic problems with fusion reactrors. firstly, the energy generated is less than the energy put in, so basically they dont work. I havnt heard of a fusion reactor that every produced more energy than was put in. >>
Breakeven, the term for a fusion reactor that outputs more than it requires as input, can be defined in a lot of ways (taken from the fusion FAQ, link unknown but you can probably find it fairly easily... I have it saved on my HD):
Commercial: When fusion power can be converted into enough electric power to power the reactor and generate enough electricity to cover the costs of the plant at economically competitive rates.
Engineering: When enough energy can be generated from the fusion power output to supply power for the reactor and generate a surplus; sort of commercial breakeven without the economic considerations.
Scientific: When fusion power = input power; Q=1. (ie. the Lawson Criterion)
A. Extrapolated - projected for actual reactor fuel using an alternative fuel.
B. Actual - determined using the actual fusion fuel to be used in the reactor (typically DT).
No one has come close to the commercial definition since there are no commercial fusion reactors and no one has any current plan to build one. Similarly for the engineering definition. The scientific definition is of far lesser value than the first two, but the "extrapolated scientific" definition was acheived in 1998 by the Japan's Tokamak reactor JT-60U. Since then reactors such as the UK JET reactor have come within 90% of the "actual scientific" definition.
<< the second problem is heat transfer, ie how to produce electricity from the heat. fusion reactors are not similar at all to fission reactors (PWR's, BWR's). >>
The first problem you mentioned is scienfitic - as in we don't know to accomplish a commercially viable fusion reactor. This problem is engineering - and I think it's safe to say that if someone develops a viable reactor method, then the heat could be harnessed effectively. And depending on the fuel used and the type of reactor, this may not even be a problem. As I mentioned in a previous post, fusing boron-11 with hydrogen produces electrons directly.
<< Actually theres a third problem too, waste. fusion reactions produce large amounts of neutron generations, and neutrons are not contained by the magnetic field. the material surrounding the plasma is thus being bombarded by neutrons, creating radioactive waste. >>
This is also a problem that depends on fuel type as well. But I agree current Tokamak schemes using D+D and D+T have this problem. D+He3, D+Li6 and H+B11 don't have this problem - ie. no protons or neutrons are generated by the fusion. (D=deuterium, T=tritium, Li6=Lithium-6, B11=Boron-11, He3=Helium-3)