Hey, Billy -- give it a chance. A few things you can do:

First, check the tire pressure. Make sure it hasn't drifted down below the manufacturer's recommendations. That's one way to kill your fuel economy. If you can stand the ride, pump them up a bit above the recommended PSI, without exceeding the pressure stamped on the sidewall. Many people go to 35psi, 38 psi, even 40 or above (but that's too bumpy a ride, for my personal taste).

Combine trips if possible. Short trips will really hurt the fuel economy, too. Your car's computers work hard in the first five or so minutes to warm up the catalytic converter to maintain your AT-PZEV emissions rating, and in those five minutes, it's not running for max fuel economy. If you run lots of short trips, your car is mostly running in "warm-up" mode rather than in a fuel-efficient mode.

A/C use hurts fuel economy some, too. It's not as bad in your HCH II as it was in the HCH I (the 2003-2005 style), but nothing is free; if you power the A/C, though it's run off the electric system, sooner or later you'll have to replenish that battery and that may come from the engine if you're not doing enough regen braking.

Do you have Econ mode on? Is your car going into AutoStop when you are stopped? If not, that's hurting your fuel economy too. I know in L.A. it may be impossible to sit in stop and go traffic with AutoStop on, but I'm just pointing out the ways that your fuel economy could be suffering.

And, gasoline with additives will lower your MPG slightly, too. I believe in CA you have no choice but to use this kind of gasoline.

And yes, your car will do some better when both IT and YOU get broken in. :-) Gentle, coasting stops, avoiding jackrabbit starts, etc., will all become part of your driving style if they aren't already.

"Real-world" MPG is a funny thing. It's very dependent on your driving style and terrain, etc. You can read what other people are getting at www.greenhybrid.com/compare. One way to test whether there's a problem with your car is to get it out on a nice highway and drive at 40-55 mph for 20 minutes, no stops, and see if your instantaneous MPG stays up in the 50s or higher. If so, it's your unfortunate driving route of stop and go that are producing your results. While hybrid vehicles are a great solution for many people, there are some driving patterns where the MPG payoff isn't worth it. However, you can be happy that your Father-In-Law is emitting smog-forming pollutants at ULEV levels, while you are besting him with AT-PZEV/SULEV levels. (Smog-forming pollutants are not the same as greenhouse-gases, which are directly proportionate to the amount of gasoline burned.)

Hope this helps. Post back and let us know what your tire pressure is... that alone can make a difference. (And get yourself a real gauge -- don't trust the ones on the hose at the Free Air at the gas station!)

peace,
Linda (2001 Toyota Prius, 2003 Honda Civic Hybrid, and now 2006 Honda Insight)
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Stop & go traffic is where the Prius really shines (EPA rates it 60mpg for "City," vs. Civic Hybrid's 49mpg). I've heard this is because the Prius is a "true" hybrid, switching off the gas engine whenever possible. Our real world experience with our Prius is around 47-48mpg with a mixture of highway & city driving.