There isn't much to get to the bottom of in regards to lower mpg on ethanol. It is there to burn cleaner or "burn a more politicially correct mix" it has less energy (btu's) just as gas has less energy than diesel.
Some states like Minnesota give you a break on the price of E85 to encourage use which results in the miles per dollar coming out close to the same. Flex fuel epa numbers show lower mpg for the same vehicle on E85 vs regular grade gas.
The Impala numbers being a good example
http://www.greenfamilycar.com/index05.htm
Of the "green" fuels B100 has a very high CN number and is in many places also sold with price support. So the folks that have a need for diesel have nothing to lose using it.