A couple of things I quickly pulled off other sites.....some is a little technical but it explains what the adding the ethanol does.
What is the range of a flexible fuel vehicle?
Response:
Ethanol has less energy content than gasoline. However, E85 also has a much higher octane (ranging from 96 to 105) than gasoline. FFVs are not optimized to E85, so they experience a 10-15% drop in fuel economy. This will vary based on the way one drives, the air pressure in the tires, and additional driving conditions.
E85 is actually E70 in the winter months as to assist in cold starting problems. A listing of when the fuel blend should change is located in the Handbook for Handling, Storing and Dispensing E85.
For comparison purposes, aggressive driving habits can result in a 20% loss and low tire pressure can reduce mileage by 6%. Research indicates Ford FFVs experience a 5% horsepower gain on E85. The range of any particular vehicle is dependent on the size of the fuel tank and driving habits. Current Ford Taurus FFVs have an 18-gallon fuel tank and will normally travel 350 miles between refuelings.
From another site about octane boosters:
One of the basic measures of energy-content is BTU/gallon or Calories/gal. The amount of heat released by any given volume of fuel is directly related to the number of Hydrogen and Carbon atoms in that gallon. Oxygenated fuels that use MTBE or alcohols to have extra Oxygen onboard deliver much less energy per gallon because the oxygen atoms are simply HUGE compared to a hydrogen or carbon. Such fuels tend to deliver less mileage per gallon than non-oxygenated fuels. BUT, they do not deliver less power, because that's more of a function of air-mass ingested into the engine per 4-stroke cycle than fuel (air is tough to cram in, fuel is simple to inject).