I am not terribly well read on the subject but I will toss my thoughts in the ring.
I have found that the average person is 2-5 years behind technology in understanding that technology. So often something is far more capable then the public thinks it might be based on out dated assumptions. Ethanol is a good case for this.
As for the corn becoming to expensive argument...I find this very unlikely. As with any commodity, as it becomes more profitable, more people grow it. People are only considering the mid-west where growing crops is still economically feasible. However, the US has millions of acres of land that could also grow crops and that inf act, did grow crops. Thinking of New England alone, we used to me nothing but farms now they hard to find. If Ethanol is found to be profitable enough you will see lots of new farms open. This will allow a completely localized process of fuel production in most all areas of the US. Add to this if the demand goes up for ethanol based on its ever increasing efficiencies and the ever decreasing stock of gasoline then the price should balance out.
Cars are not built to run on pure E85 and if they were the public may be more accepting to them as they would be more efficient then the duel purpose vehicles. Think about a hydrogen, an electric, or even a hybrid. Their is only one fueling system involved so they are inherently more efficient.
Corn, to my knowledge, is not yet been bio-engineered for fueling purposes. So it is very possible that the corn, or other sources of ethanol will be developed that are a far higher yield of ethanol.
I am by no means endorsing ethanol; I admit to being rather uneducated on the subject. So I am doing my best to apply rational thinking on a developing technology that is only fractionally established as what it seeks to supplement.
That said, I have a REAL problem with how fake other technologies are that people latch onto. Hybrids really piss me off in that they are a flat out waste of money. The average person will never make back the extra expense of a hybrid in fuel savings compared to the gasoline equivalent or the diesel alternative. On this subject, most of the alternative energy cars I have seen are wispy little things not fit for the real world. Given the same weights as these cars, I can make a gasoline car with 35 horse power get 100 mpg too. Its not hard when the vehicle only weighs 1000 pounds.
I think the real problem people have with E85 is the government invovlement in its developement compared to teh alternative fuel they like:
Hydrogen - Yeah, lets use water to power our cars becuase god knows there is enough clean water around.
Hybrid - Why did we not just buy cheaper car?
Electric - AWESOME lets use the least effecient form of energy we have today to power more stuff. There is a good reason that people have moved to propane and natural gas heating instead of electricity. Nuclear power could certainly help here. I doubt the current state of things involving extremists of all verities will allow this.
Compressed air - 1000 pounds, takes 3 hours to refueled by electricity cause more pollution and wasted energy then gasoline. Bah.
BEST CAR EVER!!!