The fact hemp is illegal is silly, but it isn't as amazing as all the potheads would have you believe.
Hemp is legal to grow elsewhere in the world, and importing it into the US has been legal since the 90s. Yet the worldwide demand for hemp has stayed flat, mostly because it requires a massive amount of water and humus rich soil compared to alternatives. The plant itself has a weak stalk that makes mechanical harvesting difficult, and can't be harvested year-round like trees can.
If it was a commercially viable alternative, you'd see usage in Europe and Asia. Remember that poor countries tend to gravitate to cost efficient materials for domestic use, yet almost all hemp produced is exported.
random link http://www.hemphasis.net/Paper/paper_files/hempvtree.htm
And one of the reasons marijuana was originally prohibited in the US was due to lobbying from wood-based paper companies.