Way back when, I took a course on ethanol fuel and I still have a few books. I'm still a fan, and I think you can get the new Mercedes as Flexible Fuel Vehicles.
Here's what I remember. Ethanol is a great fuel, it burns clean, but it doesn't have the same amount of energy as gasoline, which is both good and bad. The good news is that it burns more efficiently and less fuel is wasted in heat and emissions. But, because it has less energy, you also have to open the jets on your carb (I told you it was a while back!) about 40% to get to the right air fuel mixture for ethanol. Therefore the miles per gallon go down. You also lose some power and to get it back you have to raise the compression to something like 10:1.
So I think it could be done, but it would probably be easier to install a modern electronic fuel injection that would give you the right mixture and raise the compression.
Pete S.