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Hi I will put in my 2 cents. I have made ethanol to run in engines and no I don't work for anything related to the ethanol industry. 99% of problems with ethanol and engines not running well on E85 is the engine being made to run gas not ethanol. The worst "damage" I have seen from running ethanol was on an old Briggs and stratton engine. There was rust in the tank after letting it sit for 6 months with ethanol that had 20% water in it.
Ethanol has oxygen molecules in it so it needs a higher fuel to air ratio then gasoline to compensate for the oxygen. Like Frank Lee's snow blower the Briggs and stratton engine ran great after choking the engine = less air into engine. Also the cold weather problem with ethanol is because its less volatile then gas, so to compensate flex fuels squirt more fuel into the engine when starting. The other major problem people see even on flex fuel vehicles is running high % of ethanol on high mileage vehicles that have only run on gas and this is do to the solvent properties of ethanol. Your fuel system gets cleaned of gasoline residues and this causes clogged fuel filters.
Yes ethanol does have some compatibility issues with some materials like natural rubber and some types of plastic.
An engine built for ethanol will see the same if not better fuel economy then gas, only problem is high compression = no more gasoline. Saab made the best flex fuel vehicle I have ever seen it increase turbo boost for more power when it senses higher % of ethanol in the tank.
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