I seriously thought about doing that on the 390 I'm building. I think for an alcohol only motor, you may even want a little more compression. You may want to do some research there. My determination was that there is not enough supply of it to make it worth it. The closest place to me that sells it is 50 miles away. If you built the motor for ethanol, meaning high compression, you may get mileage to equal gasoline. The problem is, that ethanol costs more than gasoline right now. That situation could change, though. Right now, it simply doesnt make economic sense to build an ethanol motor. It may be kind of a fun project, though. It is definately something that I am keeping an eye on, and if the gas prices go up to where they are in europe, it would make sense, and I'd be building ethanol motors.

For your carburetor set up, if your not running a lot of horsepower, you can jet it richer and it may work. I dont know if the ethanol will eat the rubber in the power valve and accelerator pump or not. According to my book, strait alcohol requires about a 6.5-7.5:1 air to fuel ratio. E85 might be ok with 8.5 or 9:1. Typically you'll want to keep a lower airflow carburetor on it, like a 600cfm Holley. Reason being is that the fuel circuits may not keep up with a higher airflow carburetor, and high speed leanout could be a problem. On a street engine this should not be a problem.

My $.03