Diesel engine costs more as an option:

"Volkswagen's midsize 2005 Passat diesel sedan has a starting MSRP of
$23,360. This compares with $22,070 for a comparable gasoline Passat
model."  (1)

Prohibited by law:

"Diesel models are limited in their availability in the U.S. because
five states—California, New York, Massachusetts, Maine and Vermont
prohibit their sale due to emission restrictions." (1)

But produce more torque:

"Yet the 2.0-liter four-cylinder engine in the Passat TDI, as the
diesel versions are called, puts out an amazing 247 lb-ft of torque at
a low 1900 rpm vs. the 166 lb-ft of torque at 1950 rpm in the
1.8-liter four-cylinder gasoline engine in the base Passat sedan." (1)

Get better gas milage:

"Thanks to its higher energy content and its efficient combustion
process, diesel performance enables cars to travel at least 30%
farther on a gallon of fuel than comparable gasoline models." (2)

But the savings will take time to pay-back the initial increased cost:

"Thus, if drivers maximized the diesel's fuel economy and got the 7
extra miles per gallon, it would take about four years to recoup the
approximately $1,200 extra cost for the Passat's diesel engine." (1)

Which will take more time to pay-back if diesel continues to be more
expensive to buy than gasoline.  And, not every urban filling station
has a diesel pump. In some cases, drivers might need to venture
farther from suburban neighborhoods to locate a place to fill up.

And they are noisy (more than a comparible gas engine).

Diesel is more popular in Europe because it is taxed less than
gasoline:

"The demand for diesel in Europe is fueled by the high cost of
gasoline. (Unequal taxation of the two fuels results in diesel costing
about one dollar less per gallon in most European countries.)" (2)

It takes more oil to make a gallon of diesel than for gasoline, so the
relative efficiencies of diesel and the costs to consumer due to
taxation really make the attraction of diesel questionable:

"It should be noted, however, that it takes about 25% more oil to make
a gallon of diesel fuel than a gallon of gasoline, so we should really
look at how a vehicle does on fuel efficiency in terms of "oil
equivalents." Thus, we need to adjust the mileage claims for diesel
vehicles downward by about 20% when comparing them to gasoline-powered
vehicles." (2)

Although diesel engines generate less carbon dioxide (only because of
their slightly better fuel economy), they put out more smog-forming
pollutants than gasoline engines:

"when it comes to smog-forming pollutants and toxic particulate
matter, also known as soot, today's diesels are still a lot dirtier
than the average gasoline car."  (2)

It will take more effort and cost than it's worth to make diesel
cleaner than gasoline:

"To meet the tougher pollution standards, high-tech diesel engines
need low-sulfur diesel fuel. Unfortunately, US Department  of Energy
modeling has shown this fuel to be more oil and carbon-intensive than
reformulated gasoline.  Making a gallon of diesel fuel requires 25%
more oil and emits 17% more heat-trapping greenhouse gases than
gasoline reformulated with MTBE. Similarly, diesel requires 17% more
oil and emits 18% more heat-trapping gases than gasoline reformulated
with ethanol. This means that diesel fuel's advantages from its higher
per-gallon energy content and better performance on greenhouse gases
are partially offset by the impact of diesel's fuel-production
process."

(1)
http://autos.msn.com/advice/article.aspx?contentid=4022630

(2)
http://www.grinningplanet.com/2005/04-12/diesel-vs-gasoline-article.htm

For more info, see here:

The Diesel Dilemma
Diesel's Role in the Race for Clean Cars

http://www.ucsusa.org/clean_vehicles/cars_and_suvs/page.cfm?pageID=1307

Last year I was in the UK and had a 90 minute ride to the airport in a
Chrysler diesel minivan.  The only way I knew it was a diesel was because
the driver told me so.  It was quiet, no smell, and acceleration was no
different (from a passenger point of view) than gasoline engine.