I have yet to be convinced that ethanol is truly a good “miracle” thing for anyone but the ethanol industry. If it was truly that good, it would be able to stand on its own two feet and not survive purely due to government mandate (i.e. it only survives because the force of law is behind it). I also don’t like how it affects corn prices.
Ed Wallace has an article in BusinessWeek magazine discussing The Great Ethanol Scam. (h/t to Slashdot).
If you read the comments at Slashdot you’ll read discussion of the success Brazil has. This is all well and good, but it’s going to require massive changes to succeed, from how the ethanol is made to all the cars that we drive. If this could be done, great. But how to get there? and can we (please) allow the free market to get us there?
I do think we need to pursue fuel sources other than petroleum-based fuels because of one simple reason: we’re consuming it faster than it can be produced (by Mother Nature). We’re going to run out.
Stuff From Hsoi 
We could buy Brazilian sugarcane ethanol if there wasn’t a 100% tax on it. Courtesy of the US corn lobby.
It takes over a gallon of gasoline to produce a gallon of ethanol. Ethanol is therefore not a fuel – it takes more energy than it gives.
Ethanol is corrosive and destroys the fuel delivery components of older vehicles.
Ethanol uses 30% of corn output (hurting the food chain) and uses that to create 3% of vehicle fuel. Not so hot there either.
Drill drill drill and get new nuke plants online (the French use nukes to produce 80% of their electricity output, and the French are very environmentally sensitive.)
If we run out of oil, it’ll be squarely the above ground politicians to blame, not what’s under the ground.
So what you’re saying is it’s a combination of government interference and chemistry, but with the latter it’s then government’s poor choice of applying the realities of the chemistry.
Imagine that.