I definitely remember military hydrofoils being touted as the answer to Vietnam coasts and navigable rivers.
But I have heard little of them since. Why do we not hear of them if they do in fact exist in today’s military. Or if they don’t why did they fall by the wayside? Was it just that they were too small for politicians to spend hundreds of millions of dollars on, or what?
A couple of links:
The PHM 1 PEGASUS Class - history of hydrofoils
http://www.foils.org/phmhist.pdf - more info than you’d ever want! (PDF Format)
Basically it was an idea that never caught on so the US Navy stopped pursuing the technology in the early 90’s.
I remember a computer game on my Commodore 64 called “PHM Pegasus” that made them look really cool, though. 
EZ
The (one more link!)Pegasus Class were fast, certainly, but not, in the end, truly worth pursuing. They were all de-commissioned on Jul 30, 1993. The dates of service for the lead ship in the class are:
EVENT DATE NATION / CUSTODY
Authorized 2/2/1973 (US) None
Laid Down 5/10/1973 (US) Boeing Marine Systems, Seattle WA
Launched 11/9/1974 (US) Boeing Marine Systems, Seattle WA
Commissioned 7/9/1977 (US) Navy
Decom/Stricken 7/30/1993 (US) Navy
Sold (scrap) 8/19/1996 (US) Navy
The other units had essentially the same history.
Although fast. they were also small, short-range, expensive to operate, and had limited capabilites. ElectricZ’s (not unbiased cite) says that they were not as expensive as their reputation suggests, and then goes on to say that they had 1/3 the operating costs of a Oliver Hazard Perry-class frigate. Considering that the Perry class has 12 times the complement, this is not such a good comparison.
Furthermore, the Pegasus class carried only Harpoon missles and a 76mm main gun. It’s capabilities are limited to surface warfare, with some secondary close-in anti-air capabilities. The Perry class can engage targets in the air, on the surface, or below the surface, and carries a helicopter further extending its usefulness.
Another factor: they were never used beyond the Carribean area. The article lays the blame for their lack of use on the command structure of the command of the Atlantic Fleet. There were multiple holders of this position over the course of the Pegusus class’s service history. The author would have you believe that all of them were prejudiced against the PHM concept and conspired to kill it off. I’m really skeptical. A better explanation is that they were never given other uses because they weren’t useful for much. It was a case of a technology in search of a mission.
The author also says that PHM’s could be re-introduced cheaply. He says that 6 could be bought for the cost of one Arleigh Burke-class destroyer. This is ludicrous. Even a whole squadron of PHM’s can’t replace the capabilities of these AEGIS-equipped platforms.
There is a philosophical issue in these vessels and their life cycle. It can be called the blue-water/brown-water divide. This is a tension between using lots of smaller, inshore vessels to defend your nation or having a smaller navy of larger vessels that can range over the open sea. During Jefferson’s presidency, for instance, the Navy was almost abolished, and the defense rested on oared, shallow-draft gunboats with 1 cannon apiece. The US Navy is a blue-water navy, by and large. It has left behind it’s continental defense role and become a tool for projecting power abroad. The Pegasus class boats may have some contribution to that, but not much.
Lastly, the date of their decommissioning is significant. The Navy was contracting at that time. The 600-ship dreams of the Reagan Administration ended with the close of the Cold War. When the planners had to choose between ships to let go, and given everything above, what would you choose? From a functional point of view, the PHM’s are cool-looking toys. They were expended to preserve other units.
I had a model of Tucumcari when I was a kid. I thought it was cool.