h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

rotary engines have a different cost / benefit profile from standard reciprocating (2 or 4 stroke piston) engines.

almost all of the costs are front end loaded, with only some of them being due to low production runs. if you are going to compare rotaries with conventional engines, compare like with like, using custom 4 stroke's or the like.

rotaries also have a number of advantages over conventional engines.

fewer moving parts. rotaries have a lot fewer parts, with the percentage of moving parts being even smaller. this increases reliability and simplifies maintainance.

lower weight per power. a rotary engine can be as much as a third lighter than a conventional engine. this makes them ideal for ariel applications.

smaller per power. this means that given a fixed area for installing an engine, you can use a more powerfull engine in the same space.

another thing often not menmtioned is that rotaries havean extra vulnerability that conventional engines don't have. they use a flexible seperator to split between chambers. this is the most likely component to fail.

Also, you say that rotaries are less fuel efficient, and polute more (I will have to check my souces to verify or disprove that), but you don't say if lean burn technology can be applied to them. If it can, this changes the picture quite noticably.