I dont have first hand experience with running it, but I did a entire report on ethanol fuels for one of my engineering classes. Basically any car can run ethanol, the only reason they limit the cars is liability. Older carbed cars cant run it becuase of rubber parts (like gaskets and fittings) which the ethanol will actually degrease and eventually break down. As long as your car is FI, you should be good to go (or even a carbed car as long as newer parts are being used). As far as the exhaust, it is not bad. The major bi-product is NOx, which breaks down mucous membranes. So if you have a runny nose, go sniff your exhaust for a little bit. As far as getting lower MPG, I never heard of that, I woulda thought the other way around, but like I said before, no first hand experience.
On another note, you can make your own ethanol Biofuel for about 60some cents a gallon or even cheaper. Just get food waste (corn, potatoes, breads, ect.) and make a distillary, there is a website on how to do it for like $30 in parts from lowes. Make sure you use food waste, that way you cant get in trouble for moonshining as it wont be suitable to drink if you use waste. The guys who run the site have a prison nearby and go every day after lunch and collect the leftovers for free and use that to make ethanol. So many possibilities....
As much research as I did, I cant be held responsible for any damages to your car if you decide to do it, but you already knew that.