Apparently congress has mandated that all automobile shall be mixed
with ethanol in the near future. Are there airplane engines that can
use this fuel? Or ways to mitigate the problems caused by ethanol?

An article on EAA says there are three issues with ethanol
(http://www.eaa.org/education/fuel/knopp_alcohol.html)

-First, the addition of alcohol to gasoline adversely affects the
volatility of the fuel, which could cause vapor lock.

-Second, alcohol present in automobile gasoline is not compatible with
the rubber seals and materials used in aircraft.

-Third, phase separation, which happens when the fuel is cooled as a
result of the aircraft's climbing to higher altitude. When the
alcohol separates from the gasoline, it may carry water that has been
held in solution and that cannot be handled by the sediment bowl.