The 2002 VW 1-liter is one of the more sophisticated and practical designs. It is only 290 kg empty and has tandem seating for lower frontal area and lateral stability if there is only one occupants or if the occupants are of very different weights. Construction is mostly carbon fibre, which means it will be spendy (VW said it would enter limited production in 2010 two years ago)

It is usable on the highway and can easily cruise at freeway speeds. Cd is around 0.15 (!) and the frontal area is very low as the car is only 1 meter tall and 1.25 meters wide.
One liter refers to the amount of fuel needed to take it 100 km, not the engine size. This works out to about 235 mpg in a normal driving loop (not just highway) and the prototype was closer to 300 mpg. The one cylinder engine is about 300cc and 6.3 kW and there is room for improvement.
It has antilock breaks, airbags, crumple zones and the like - a modern car, but the size difference is so great acceptance in the US is very questionable unless fuel was very expensive. It is the sort of thing that would see great cost reductions in high volume product as carbon fibre construction drops in price (the Chinese have been making good progress).
An electric or extended range EV makes sense. The efficiency of an EV will be at least twice that of a really good diesel. The battery requirements for the extended range hybrid would only be a few kWH. Denmark currently waives a very high tax on vehicle purchase (about 180%) for EVs, which might make an EV version practical.
Making it practical is another thing. For town use aerodynamics aren't as important and one can imagine more space for carrying stuff.
One expects much development in this space as high density urban populations increase and hydrocarbon based fuels become more expensive. It may be one of the few growth areas in the industry 10 years out. (not that there are any now)
Many other schemes exist for urban use. The two wheeled Segway assumes people are always too lazy to even walk and focuses on the great number of trips that are up to a few miles (perhaps five) where slow electric vehicle on the sidewalk might make sense. The problems are it is expensive, heavy and cumbersome to cart around and people just look stupid on them. (an anthropologist friend told me it would badly fail even if it was free on the day it was introduced for the last reason. The stance is very unnatural and just looks funny).
There has been progress in human/electric hybrid vehicles - mostly modified bikes, but enclosed
velomobiles exist. These might be more practical for some, but it will take very high oil prices for them to get any attention.
The sad thing (at least in the US) is an
excellent solution exists for short trips - the bicycle. There are many reasons why they don't work - traffic control, parking, the physical condition of the average American - but greatly expanded use would not be difficult in many areas.
Adoption of any of these probably depend on regular $150/barrel oil.