Re: has anyone tried e85 yet?
Only way to tell is to try it. Mix up a batch of E-85 and your 2 cycle oil in a jar, let it set around for a week or so and see if it separates. One problem with alcohol as a fuel is it readily mixes with water (why it has to be moved by truck and not underground pipelines like gasoline) so whatever you store it in has to be sealed pretty well to keep out moisture.
Biggest emissions from a 2 cycle engine is the oil though, without the oil a 2 cycle actually puts out more energy for the fuel used then a 4 cycle.