I have played around with E85 quite a bit and would like to dispell some of the rumors and share my experience with it so far.
Myth: Some people are stating that E85 will ruin your seal and even your hard lines. This is BS. The 15% gasoline makes it much more stable so it won't eat the rubber components as pure ethanol would. The seals already in your car will handle E85 just fine. I switched my 88 mustang with 140k+ miles to E85 and it hasn't had any fuel leaks, and it's not nearly as modern or new! I didn't replace any seals, only threw in bigger injectors and literally pumped in the E85.
E85 has a different stoich ratio than gasoline. It takes about 30% more fuel to mix with the same amount of air. This is why a car has to be specifically designed to run on E85. Factory flex fuel vehicles have a sensor in the fuel tank to determine the amount of ethanol in the fuel, so you can switch between gasoline, E85 or any ratio inbetween without a problem. You don't have this sensor. It may be possible to re-tune if you want to run E85 full time, but you'll have to re-tune again if you want to run gas or a mix of E85/gas.
There is a company selling a box that adjusts the pulse width of the injectors to compensate for running E85:
http://www.fullflexint.com/ It has different levels (1-10) you can select for the ratio of ethanol you have. It's pretty inventive and would allow you to run E85 and any ratio of E85 in your tank without a problem. It isn't fully automatic though, and will require you to flip a switch when changing between E85 and gas.
I've been running E20 and E30 in my 97GT for a while now. You can see my posts in the 4.6 forum here:
http://forums.stangnet.com/showthread.php?t=742763&highlight=ethanol
On E30, I actually noticed about 5% less mileage. On E20, the mileage is as good or better. No check engine lights, and best of all, no more pinging! It pings terribly on 87 at times, which I never could understand.
I've read articles on running non-flex fuel vehicles on E20 and E30. They are doing long term tests and report no issues with running these ratios. Mileage reports are even slightly better on E20 or E30, depending on the make and model of the car. Minnesota is even considering making E20 the standard in their state.
As I mentioned earlier, I switched my 88 mustang with the 2.3 turbo to run on E85. It's GREAT! I put in larger injectors to compensate for the different stoich ratio (from 35lb to 52lb). I love the extra octane of E85 with the turbo! I'm at 19psi now and will be bumping it up again soon. I'll just have to see how much I can get out of the 52lb injectors.
My summary: If I had an 05+ mustang, I wouldn't convert it to run on E85 because it would probably void the warenty and need constant small adjustments. I would however run E20 or E30 if I could find it. You could easily run that in place of premuim, as E30 should have 94-95 octane.
Corn may not be the best way to get ethanol, but we'll eventually get our heads out of our ass and develope more ways to get ethanol. It's still a hell of a lot better than buying foreign oil!