If one is running E85, why not just mix the water with the fuel? It will surely dissolve entirely. It has the bonus of being able to lean out the mixture a bit, for less wasted fuel, and cooling the combustion process, allowing you to do exactly that (leaner mixture) without damage to the pistons, etc. Why not mix up a few small batches with progressive rates of dilution until you hit an ideal? The engines are tuned way too rich as it sits, due to time/distance/atomization limitations of the air column's interaction with the fuel injected.
This kills two birds with one stone. Leaner combustion, which is more efficient, substantially, as long as one is not hitting lean misfire, and cooling combustion that is usually too hot WHEN it is without a bunch of useless fuel to denature.
The ideal mixture, if there is one, would be easy enough to find. Is there a Water Tiger in your tank?