I have an 1998 S70 that I ran exclusively on E85 for 9 months here in Tucson, AZ with NOTHING being done to the car.

Gas Mileage
The gas mileage went from 25 miles/gal to 19 miles/gal on a mixed highway/street profile. That is more or less what is predicted with the decreased energy content of the fuel.

Start Up
Sometimes, the car had issues starting up, but after two or three attempts, the engine would turn over. The issue got worse on colder days (40 F and lower)

Mechanical Problems
No mechanical problems at all. The only empirical evidence that I have is that the car still runs. I have not noticed any leaching or problems with fuel supply or rubber materials. My Volvo just keeps on going.

Check Engine Light
At concentrations above 50% ethanol, the check engine light comes on. The error code has to do with fuel/air ratios. If I bring back the concentration to E15 or "normal gasoline," the check engine light disappears. The light appears once again if I bring up the ethanol concentration over 50%.

Leaks
No leaks of any sort

Ride
Subjectively, the ride seems to be smoother, but that might just be my bias.

Economics
Since there is about a 25% decrease in fuel mileage, I needed the price differential to be around that. For a month or so, I broke even, but then the differential was not enough. Nevertheless, it it is rewarding that I can pay a little more and be off the oil grid. I made a spreadsheet documenting part of the experiment.

Disclaimer
This is my experience and only my own. Experiment at your own assumption of risk. I have no ties with any oil or ethanol major and no axes to grind.

Final Thoughts
Hypothesize all you want about why ethanol can't be/shouldn't be used on cars, but at least I can say that I can run my S70 with E85.

 

Emissions
I tried taking the car with E85 to see what would happen and see if I could pass emissions with E85. Unfortunately, the car failed immediately because it had the check engine light on (see above). I could not discern from the test if it would have passed emissions otherwise.

Filled up the car full of regular gas, the check engine went off and then the car passed emissions.

So far the car has passed emissions twice since the start of this ethanol experiment

Speed
I have taken the Volvo upto 90 mph on the highway on E85 and there has been no problems. This July 4th weekend (2010), I drove up to Sedona averaging 75 mph on E85 and there were no problems (around 240 miles)

Acceleration
Traveling steady state at 75-80 mph, when I floor the car, it responds very very sluggish, and I have to wait some time before it gets to 85 mph. I am not mechanic, but it seems that the car has reached some limitation. Mu guess is that the fuel injectors have reached their limits and can not pump up enough of the E85 to keep up.

Testing Procedure

Not knowing what would happen, I started very slowly going up the ethanol percentage, going from 0 to 5% to 10% to 15% and up to E85. My log of the event is buried in an archive and I will supplement this entry with the precise numbers

 

Turbo?

Interesting, thanks doc.