I'm not sure where you're getting the fuel economy drop from that link - it deals with E10 vs E85, where there's about a 30% drop (significant, but far less than the change in gasoline volume).
I'm curious to see how things change when you use an engine designed specifically for E85. I'm told ethanol behaves a lot like high-octane gasoline, which means an engine built for ethanol could have greatly increase compression, which can improve economy. Alternatively, you can run much higher boost, which I believe can directly improve efficiency, or can simply be combined with a very small engine.
