Is it a reliable replacement for fossil fuels? I mean, it sounds like you could just run it on water if you had the capability to split it into it's perspective components then run it through a PEM or whatever you have to do, right?
Asking whether it is a replacement for fossil fuels is the wrong question to ask. It cannot replace fossil fuels, because it needs fuel. In fact you can operate a fuel cell with fossil fuels if you want to. Whatever goes into the fuel cell has to be the replacement for fossil fuel, not the cell itself.
The question you want to ask, is whether hydrogen can be a replacement for fossil fuels. This is somewhat independent from the fuel cell, as there is in principle nothing preventing an internal combustion engine running on hydrogen. So you could try to replace fossil fuels with hydrogen without fuel cells.
If we had an infinite power source, we could indeed just split up water and use that as fuel. As we don't we have to consider efficiencies. And there is the problem: Although the conversion inside the fuel cell is quite efficient, you also have to consider the conversion efficiency when you produce the hydrogen and the losses you have while transporting and distributing the hydrogen. Because the atoms are so small, hydrogen is a very trick gas to store and while the energy content per mass is quite high, it is difficult to get a high energy content per volume while minimizing losses.
As it is, it seems more economical to store the electricity in batteries instead of using hydrogen as an intermediate energy carrier. I think its more likely we're going to see most cars powered by batteries instead of hydrogen.
There are some other uses for fuel cells, though. It can be uses to produce electricity from methane. So if you are having a biological process generating methane (maybe as a waste product) you can use a fuel cell to efficiently convert that into electricity.