Just because the O2 sensor can read Lambda for various fuel mixtures does not mean it will run well on it.
Quickly AFR at stoichiometric for Petrol is 1kg of petrol to every 14.7kg of air with a density of 0.755 kg/l. Ethanol (e85) is 1kg of Ethanol to every 9kg of air with a density of 0.790 kg/l.
Starting with the density ethanol is 4.43% heavier per unit that would help economy if stoichiometric was the same or close.
Now for stoichiometric differences ethanol needs 38.78% more fuel by weight.
So for "identical" (Same TPS, load, air temp, and rpm the engine will still suck in the same amount of air) situations if running e85 will need 34.35% (38.78-4.43=34.35%) more fuel.
With that said identical is not likely to happen due to different flame propagation speeds, evaporation, and timing all those can place a different load on the car making for a different amount of required fuel.
As for the post asking how can you go further on LESS energy 9gal of petrol to 9gal of petrol + 1 gal of ethanol. You are confusing TOTAL energy for PER UNIT in the 10gal there is more total energy but pound for pound ethanol (or a mix) has less energy.
Its like topping a bottle of Bacardi 151 off with 80proof rum and then wondering why you are not getting as drunk as those who have drank the same amount as you but there drink is straight 151 and your drink is 80% 151.
My info on the numbers I posted here
http://ecomodder.com/forum/showthrea...tml#post199084