The engine can handle more power, but it's abnormal combustion that destroys stuff.
With the small bore, high octane fuel, and low revs, you're not going to kill it unless you get the tune wrong ( highly unlikely, E85 is very forgiving ) or you are ham fisted with the build.
Get a set of pistons made to net you 15-16 to 1 static compression, a Metro XFI cam, and a Megasquirt or Emerald computer to get it tuned in.
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Volvo WIA42 VED-12 / 335 hp / 1300 ft/lbs / 9 mpg
Big n' Boxy, Never met a Hill it Didn't Like
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