Plus, ethanol is bad in cold weather climates. As I understand it, it can phase separate and put a bunch of water in your tank (basically).
Other than the propaganda reason (i.e., to make people think "85" is the octane) the reason that it is called E85 is that it is only 85% ethanol and 15% gasoline. Ethanol by itself it not volatile enough to start an engine in cold climates so they spike it with gasoline.
Also you're correct it can phase separate but you could just as easily blame the gasoline for that problem as the ethanol... and if you tend to drive your gas tank down to near empty it reduces the problem even further.
Not sure about any antifreeze properties but on the whole it's not good for small carbureted engines.
In my part of Canada people were actually somewhat happy when the 10% ethanol showed up as it meant that you didn't have to add any fuel line antifreeze over the winter.
Ethanol does absorb water from the air.
But that's how it works as a gas-line antifreeze: It absorbs undesired water from the fuel line and mixes with it so that you can burn it.