Humans could not possibly be a viable fuel source. The sugar, proteins, and lipids that would be required to raise a human to adulthood like in the movie would need to come originally from plants. Plants use light energy from the sun to produce sugar through photosynthesis. The idea that the machines would convert heat and electricity from fusion into light to produce sugar to feed humans to harness heat and electricity is absurd.

The idea of using the human brains as nodes in a giant matrix is interesting. I believe there is more than enough processing power there to support the virtual reality and expand on the machines processing power. Even more interesting to me is the parallel between this story and Issac Asimov's rules of robotics. Perhaps the machines never eliminated the humans because they can't. Perhaps they believe they are in fact doing the humans a favor. Keeping us safe from ourselves. 

As a scientist, I am deeply bothered by the notion of an entire movie being based on such an absurd premise. We must all remember, however, that if the future machine overlords do in fact eradicate human kind (as they certainly would) then movies like the matrix and terminator don't get made in the first place. These movies are compelling but why? Because at the heart of them is the notion that faced with an overwhelming common enemy we would stop fighting ourselves and work together.