Several people have remarked on how large and greasy a molecule torcetrapib is, and speculated about whether that could have been one of its problems. Now, I have as much dislike of large and greasy molecules as any good medicinal chemist, but somehow I don't think that was the problem here.
For the non-medicinal-chemists, the reason we're suspicious of those things is that the body is suspicious of them, too. There aren't all that many non-peptidic, non-carbohydrate, non-lipid, non-nucleic acid molecules in the body to start with - those categories take care of an awful lot of what's available, and they're all handled by their own special systems. A drug molecule is an interloper right from the start, and living organisms have several mechanisms designed to seek out and destroy anything that isn't on the guest list.
An early line of defense is the gut wall. Molecules that are too large or too hydrophobic won't even get taken up well. The digestive system spends most of its time breaking everything down into small polar building blocks and handing them over to the portal circulation, there to be scrutinized by the liver before heading out into the general circulation. So anything that isn't a small polar building block had better be ready to explain itself. There are dedicated systems that handle absorption of fatty acids and cholesterol, and odds are that they're not going to recognize your greaseball molecule. It's going to have to diffuse in on its own, which puts difficult to define, but nonetheless real limits on its size and polarity.
Then there's that darn liver. It's full of metabolizing enzymes, many of which are basically high-capacity shredding machines with binding sites that are especially excellent for nonpolar molecules. That first-pass metabolism right out of the gut is a real killer, and many good drug candidates don't survive it. For many (most?) others, destruction by liver enzymes is still the main route of clearance.
Finally, hydrophobic drug molecules can end up in places you don't want. The dominant solvent of the body is water, of course, albeit water with a lot of gunk in it. But even at their thickest, biological fluids are a lot more aqueous than not, especially when compared to the kinds of solvents we tend to make our molecules in. A hydrophobic molecule will stick to all sorts of things (like the greasier exposed parts of proteins) rather than wander around in solution, and this can lead to unpredictable behavior (and difficulty getting to the real target).
That last paragraph is the one that could be relevant to torcetrapib's failure. The others had already been looked at, or the drug wouldn't have made it as far as it did. But the problem is that for a target like CETP, a greasy molecule may be the only thing that'll work. After all, if you're trying to mess up a system for moving cholesteryl esters around, your molecule may have to adopt a when-in-Rome level of polarity. The body may be largely polar, but some of the local environments aren't. The challenge is getting to them.