You have to consider and understand the system, not just one part of it.
Octane is just a measure of the effort needed to combust the fuel... i.e.- how much heat and pressure the fuel can take before it ignites without the aid of the spark plug.
Octane alone will not increase power. It's actually worse to higher octane than necessary since you run the risk of incomplete combustion, causing large amounts of carbon build-up on the piston and combustion chamber (continuously running 93 octane in a 9:1 compression consumer-grade engine will do this, for example).
An engine designed to burn gasoline will have a lower compression ratio than one designed for alcohol fuels. So, burning E85 in an engine designed to also burn gasoline you lose a lot of fuel efficiency. Which is what we are doing with current flex fuel engines.
Take two 5.3 V8s. One at our factory ~9.5:1 compression and another built to 12.5:1 compression. Heads, cam, etc are all kept the same.
If you were to run the 9.5:1 engine on gasoline and the 12.5:1 engine on E85, they would get roughly the same mpg in all driving conditions. However, the 12.5:1 compression engine (running E85) will produce substantially more power as alcohol, while not as energy dense, has a much higher heat of vaporization (~2,400 BTU/gal, versus ~900 BTU/gal for gasoline) which will act as a chemical intercooler as well as a fuel source. The higher compression and cooler (denser) intake charge allows you to extract more net energy from combustion, making up for the smaller energy density (gasoline ~115,000 BTU/gal, E85 ~80,000 BTU/gal).
In conclusion, at this time your only reason to run E85 is if it's economical to do with considering prices in your area. Or if you plan to run a supercharger or turbo, where alcohol fuels shine.
My personal experience for consideration: on the highway, my 07 yukon gets 21mpg on gasoline and 17 on E85 (documented over 50k+ miles). Gas is $3.70/gal here which calculates to 17.6 cents per mile, where as E85 is $3.35/gal which calcs to 19.7 cents per mile. For $3.70/gal gas, E85 would have to be $2.99/gal to break even.