Actually, by the very end of the steam car era, they'd actually cracked it. But by then it was too late.
Look at this clip of Jay Leno's Doble E steam car from 1925. It's remarkably ahead of its time and pretty much solved all the problems with steam. It had a clever coil system that superheated the steam in no time, and it also condensed the steam back into water and reused it, thereby using very little water. It is possible to build completely closed steam engines/turbines, it just takes pretty big condensers to do it. They can be very efficient and have tremendous torque if designed right. And they can be heated by anything - wood pellets, garden refuse, coal, oil, gas, whatever.
https://www.youtube.com/watch?v=ACO-HXvrRz8