For the full last year I've been stuck on a paper I've been writing. The paper documents the workings of a new algorithm I made to solve a computer vision problem. We submitted it to a journal and it was rejected on the basis of not having enough theoretical novelty. I made a lot of major modifications, then submitted it to a different journal, who rejected it for mostly similar reasons (and this time the reviews were much more critical, even though to me it seemed like a better paper).

Now that I've been working on this problem for so long I can see that there are good reasons why it wouldn't get accepted. It really doesn't offer anything new to the table. If I were a reviewer I would reject it. I feel like I am wasting my time on this and that I should cut my losses and try to scrape up what I have and work towards another paper. I am already 2 years into my phd, I don't want to waste any more time.

My supervisor has been pushing me to submit the paper. He has his own concerns - getting grants and pushing phd students through the door, and I can see why he wants to do this, despite being vaguely aware of the flaws. But I am certain the paper won't get accepted. I am certain that ahead lies months and months of rejection and heartbreak (and not to mention my supervisor's view of my abilities steadily declining). I don't want to risk that.

I really don't know what to do here. Has anyone been in this situation before?

A short story on my paper which is titled W:

When W was first submitted, the editor provided one reviewer's comment and suggested me to present it in a conference.
Of course, this paper was rejected for publication, but the editor still suggested "revise and re-submit".

When W was submitted again in the same journal, there are three reviewers' comments.
1. First reviewer's comment is the paper is very well written, but there are a few grammar mistakes etc. Actually, many of which were considered wrong because this reviewer is likely an 'american'... (The paper W would become partly british style, and partly american style. :-) Anyway, he suggests publication with minor corrections.
2. Second reviewer's comment is essentially "major revision".
3. Now, the third reviewer has made over 100 comments on my paper... This is quite unusual. The reviewer seems over-reacted. There are simpler ways to reject a paper. However, if you trust this reviewer, it may suggest my paper have great number of flaws or i should be blacklisted...

However, i am not surprised. It is because if W is published, the reputation of one professor could be affected. This is why he need to go the extra mile to criticize my paper. But i do feel that my paper should be improved, but not to that extent. There are still several possible journals!

My main point is "do not be affected by the reviewers' comments." (american style)
My main point is "do not be affected by the reviewers' comments". (british style) :-)
(Some reviewers may not be aware of the differences between british and american style...)

Oh yes. You could consider to apply this algorithm to many kinds of images: nature, satellite images, micrographs, astronomy photos etc...

Could you just reformat it and submit it to a journal with a lower impact factor without spending any more time on it? That way, your supervisor will be happy that you are still trying, and you can forget about it for a bit whilst it gets reviewed. you could be deliberately sneaky and pick a journal that only has a few issues a year as they tend to be slower to review things and get round to publishing them...

tt_dan: Actually I did send a paper documenting the algorithm itself to a conference and it was accepted. The journal version includes this plus a detailed comparison of the method against recent techniques. However, truthfully, the benefits of using my method are somewhat marginal and only occur on a very narrow type of data set.