To date, optical diffraction gratings filled with liquid crystals have not produced high (>50%) diffraction efficiencies in nonzero diffractive orders. Rigorous coupled-wave analysis indicates, however, that very high diffraction efficiencies (99% in single-wavelength polarized illumination) are theoretically feasible for this class of device, even when the devices employ rectangular grating profiles. These theoretical predictions with rectangular rather than blazed profiles imply simplified fabrication techniques for experimentally achieving high efficiencies by use of deep-etch submicrometer fabrication techniques.