1) It's not much more environmentally friendly than Natural Gas, since the best way to create the hydrogen involves using Natural Gas. It's a medium for storing energy, not a source of energy.
2) Storing the hydrogen on the vehicle is difficult to do, since Hydrogen is the most diffuse gas in the universe. Compressing it isn't easy and in order to store compressed hydrogen on a vehicle, you need very large very heavy and expensive cylinders.
3) Our filling stations would have to be modified to be able to compress or store compressed hydrogen, which, again, is difficult and expensive. The delivery fleet to take the hydrogen from the "refineries" to the gas stations would also have to have this capability.
4) The membranes used in the Hydrogen fuel cells are currently made out of Platinum, and are very expensive. In addition, the membrane degrades pretty quickly over time, needing to be replaced after about 3 years, which is a very expensive replacement. Also, as the membrane degrades, we lose power, causing the car to perform more poorly as time goes on.