I'd go electric first...far more efficient. After that, I'd consider CNG if it's cheap in your neighborhood. Then I'd think diesel. AFTER that, I'd start scheming about HHO or hydrolysis.
It's not a bad idea but the devil is in the details. It's definitely not a free lunch idea, like a lot of people think. You're generating and injecting a perfectly stoich H2/O2 mixture, and using the losses inherent in an ICE to eke out more economy. Same general idea as a turbocharger, just with a different technology. You need a large volume of gas to do that though. All the garage chemists I've seen are hacking away at design with what seems like zero engineering. Free hydrogen with lots of O2 burns very nicely...and invisibly...and hot...something to be aware of there.
I'm waiting for someone to run a system on a bench somewhere to find out just how lean you can run a boosted engine like this. How much gas flow, how to re-tune the DME, etc. Most of the hackers I've seen are claiming that they get 200% better mileage on carb'ed truck engines or FI motors with disabled O2 sensors. No proof, just someone saying they did it and they can sell you the secret. No thanks.
You're right about the drag though. Even a small gas generator uses a lot of watts. Say 60 or 80 watts' worth of drag on the alternator will definitely eat some gas.