I was trying to come up with a simple explanation. By 3rd or 4th page, I realized, I don't have one. Not a simple one, at any rate. So maybe I'm missing something myself.
Basically, keep in mind that heat is composed of several types of mechanical energy intrinsic to the substance. There is kinetic energy of molecules, there is potential energy of the fields keeping them together, etc.
If you take the ideal gas, as a simplest example, put it into a cylinder with a piston, and allow gas to expand to infinity with no external pressure and perfectly insulated cylinder, you can get 100% of gas' internal energy in mechanical work. But your final temperature and pressure are both zero. That's simply not attainable in real world.
More realistically, say you take a cylinder, ignite something inside, releasing amount of heat Q, and let the cylinder expand until pressure is once more equal to external. Let's say putting in Q of heat took temperature from T0 to T2, and expansion took temperature down to T1. Energy you put in is is Q=CV(T2-T0). Work you get out W=CV(T2-T0). I derived all of this in the long explanation with all the physics, but it really doesn't matter. What you have is coefficient of efficiency CoE = W/Q = (T2-T1)/(T2-T0) < 1. So it's not a problem of extracting energy efficiently. It's the problem extracting all of it, because whatever your "exhaust" is going to be, it's going to be carrying off some of the energy, unless you can bring its temperature to absolute zero. And to cool something to absolute zero, you need something already at absolute zero.