It is an alternative fuel. Better or worse is up to individuals to determine.
Yes, ethanol is environmantally friendly. The production process removes CO2 from the air, and burning it puts less CO2 back compared to gasoline. Pure ethanol is non-toxic, and you can drink it. Fuel ethanol is always mixed with gas, so it is poisonous. It's Octane is about 115 for pure ethanol ( which you can't get ) and the Octane of E85 ( 85% ethanol ) you can get is 105. Ethanol is often used to make "regular" gas into premium gas, but this varies from state to state.

The main problem with ethanol is not with the engine. The engine will usually perform better with ethanol in the mix. You will always get lower harmful emissions with ethanol too. The problems, if any, stem from the electronics... those pesky O2 sensors primarily, and the computer program in the car that does not know how to deal with ethanol.

In old cars ( 1980 and older for example ) ethanol should not be used with natural rubber parts, natural cork gaskets, fiberglass tanks, or lead-lined tanks. These things you will not find in newer cars.