"Last week, the prototype was presented to the energy division of the Advanced Research Projects Agency, which is backing the Michigan State University Engine Research Laboratory with $2.5 million in funding."

I am just as skeptical, but if this is how they get their funding to build that working prototype than I'd say it's fair enough.

Even more importantly, how easy is it to maintain this engine? The reason rotary engines haven't become more mainstream is that the first attempt (the Mazda RX-7) was notoriously difficult to repair. The RX-8 is better (I hear), but the damage has been done - of all the major carmakers out there, only Mazda offers a rotary engine.

Untrue.

The RX-7's rotary engine (the 13B series) is actually phenomenally reliable, and there are many examples with well over 300k road miles. The RX-8 uses a newer variant of the same engine - the 13B-MSP RENESIS. Additionally, Mazda used the rotary in competition (in the infamous Mazda 787B) at the 24 hours of LeMans, which is a notoriously difficult test of engine reliability.

The myth of poor rotary reliability primarily stems from the 3rd-generation RX-7. The notoriously-complex mechanically-controlled sequential twin-turbo system (affectionately known as "the rat nest") was prone to hose disconnects and failures, which often led to over-boost situations. Additionally, owners that modify their cars often exacerbated the problem, installing free-flowing intakes and exhausts, as well as boost controllers, and did not properly modify air-fuel ratios to compensate. These situations led to increased engine heat and premature failure, which gave the rotary an unfair bad reputation. Many owners now convert to a simpler single-turbo setup with electronic boost control and careful air-fuel tuning, which is far more reliable.

The actual (and admittedly significant) drawbacks of rotary engines are poor fuel efficiency and high exhaust emissions, both due to incomplete combustion. This has kept them out of mainstream applications and thus they tend to be used primarily in performance applications.

The states complaint was difficulty of repair, not unreliability.

This is also untrue; the rotary is much simpler than a piston engine and has far fewer moving parts. Replacing major mechanical components on a rotary is easier than a reciprocating engine. As long as the associated systems are also simple, the rotary is one of the easiest engines there is to repair.

Most work that has to be done on car engines has nothing to do with the engine itself, but control, ignition and fuel delivery systems. Older rotaries had carburetors, which required regular adjustments to keep in tune. As mentioned above, the third-generation RX-7 had a complicated twin-turbo system that created some reliability problems of its own. Non-turbocharged fuel-injected second-generation RX-7s on the other hand are some of the most reliable and low-maintenance sports cars ever produced.

After looking into it more, it seems that a lot of the initial complaints about difficulty of repair were due to the lack of spare parts. It seems that Mazda had some manufacturing difficulties with the early versions of the RX7 engines and couldn't manage to meet demand for both whole engines and spare parts.

Also because they tend to light on fire, have next to no torque where you want it, purposefully burn a metered amount of oil, get crap mileage (which degrades relatively quickly to boot), ...

Eventually people tire of playing the rotary game, usually when they realize the weight savings and high redline aren't worth the numerous flaws on anything but a track car (and even then, only if you can live without much low-end torque).