Your points are well taken but there is one element that I just can't wrap my head around.  It has appeared to me that there has been a well orchestrated and concerted effort by the petroleum industry (and others) these past few years to disparage ethanol.  Now we come to a time when it appears that the ethanol industry is being backed into a corner, in danger of being put on the ropes, and we are supposed to believe that the oil companies, instead of pushing their advantage, are now ready to play nice.  Butane, toluene and xylene are hydrocarbons created in the extraction and distillation in the petroleum refining process. What do the oil companies care that these compounds are more expensive than ethanol?  They are selling them, not buying them.  And the oil industry has never been noted for its environmental initiatives.

On another note, there has been some discussion about waiving the advanced biofuels portion of the RFS to allow imported Brazilian ethanol to substitute for corn ethanol.  In my mind this would be the absolute worse development possible.  The technological advancements necessary to achieve this status has been exceptionally expensive and to then destroy their market just as they are coming on line.