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E85 has anywhere from 100 to 105 octane. Thus, you could easily build an engine with a very high compression ratio, which would raise the efficiency of the engine greatly.
The EPA did a study where they converted a Volkswagen TDI diesel engine to run on E85. They replaced the diesel fuel injectors with spark plugs, and used conventional port fuel injection. The TDI has 19.5:1 compression ration, and that was unchanged. They got upwards of 40% efficiency, same as a diesel.
Sadly, because E85 pumps are so rare, you can't buy an E85 only engine. A flex fuel vehicle has to be able to run on gas, so that precludes a very high compression ratio. Without that increased efficiency, a FFV running on gas gets crappy mileage, because ethanol has less energy that gas.
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