It's not the ethanol, it burns, it produces power, at 10% there is no way it can cost you 10% MPG. Yes there is slightly less energy per gallon so in the same engine you would get very slightly lower MPG. On the other hand if the engine was not compromised to run on gasoline (yes they are compromised to run on gasoline) and was instead built with much higher compression, as much as double the compression than you could extract a lot more energy from an ethanol powered engine than you can from a gasoline engine. If we had e-85 around here I would be trying to run 16 to 1 compression and get much better MPG and TQ.

Cars got better MPG 30 or 40 years ago because we had lead in the gas permitting more MPG and we drove slower, you can get much better MPG in these modern cars if you set the cruise at 50MPG and could somehow keep the stupid 8 9 10 speed automatics from downshifting all the time, more compression would give the engine more TQ and require less of those down shifts.

As far as NOX costing MPG yes it costs a lot, almost every engine ever mass produced can tolerate at least one more point of compression that is generally considered to be worth about 5% improvement in MPG, imagine if every car suddenly got 5% better MPG how much cheaper fuel could be... and many engines can easily handle 2 points compression increase, the reason they can't do this is because NOX is formed with those much higher compression ratios and right now there is not a good enough and cheap enough catalyst to get rid of the NOX in the exhaust so lower than ideal compression ratios have been the go to answer for the manufacturers along with EGR that statistically reduces the chances of a fuel molecule from finding an oxygen molecule in a timely manner.