Does E85 give a racer an advantage?
Yes it does, in almost all cases. Like all alcohol fuels it allows more fuel to be burned, hence more power.
Most internal combustion engines are air limited. By that I mean their ultimate limit to power production is the amount of air you can stuff in the cylinder.
Once you burn up that air, you cannot make any more power. Alcohol fuels like Methanol , and E85 being highly oxygenated have lower oxygen demand and generally wider flammability limits than gasoline. You can efficiently burn a very rich E85 fuel mixture, that if you tried the same relative mixture (lambda) on gasoline the engine would hardly run. With no modifications engines typically can make about 5% more power just by changing to E85. If they are specially built to take advantage of its high fuel octane and high cooling power (high compression ratio and or boosted) 10% or more increase in power over comparable gasoline is typical.
E85 also raises the engines thermal limits due to its high evaporative cooling effect. At power levels that would melt parts or cook a gasoline engine E85 works well. Some racers converting to E85 actually have difficulty getting enough engine heat for efficient operation and have to go back to using thermostats or a warmer thermostat to get best engine operation.
E85 sometimes does not increases peak power significantly but it raises the entire power curve, and broadens the ability of the engine to pull under load because of its burn characteristics. This sometimes means an engine that only gained a couple horsepower peak power runs noticeably faster times on the track. Most drag racers that make the conversion see ET drops of a tenth or more.
All that said, as posted above in the land speed environments E85 would be considered fuel, and if your going to be running fuel class you will be competing against folks running both methanol or nitromethane. E85 still has some advantages even though it has slightly lower power potential to methanol it starts better, requires less maintenance, and is less toxic not to mention being easy to find in many parts of the country.
It is a great fuel for folks who want a high performance daily driver, and usually produces more power than the hardware can handle in daily driver builds if pushed hard. It will tolerate over 30 psi of boost in turbocharged applications, so most any engine can be pushed to idiotic levels of power for a daily driver. It is becoming popular in many racing environments that allow it as it is in effect a cheap readily available "race gas".
Larry