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Another few things to think about are the difficulty of properly mixing a gas and a liquid (air/fuel). The change of rpm's only make this more difficult. At low rpm's you have plenty of time for oxygen to find the right place on the hydrocarbons, but if the rpm's are too low the fuel will go from a fine mist to larger droplets. In the mid rpm range the engine is usually calibrated for this area and everything is working great. As you get into the high rpm ranges, denser fuels begin scavenging for o2 as there is simply not enough time to create a good air/fuel mix. Usually a lot of fuel is wasted here as it is either burning out of time, or out of place. Since at high rpm's there's a lot of heat too, burning is uncontrolled, which is where octane comes in. Octane keeps fuel burning when and (hopefully) where it should be.
Oxygenated fuels address this issue by premixing oxygen and fuel, unfortunately in CA, we are using 5.6% ethanol which as OP says has a lower energy density. If we used chemicals with higher energy density, higher oxygen density, then we would use .1% oxygenation and have the same effect without the drop of power.
As a small side note, it's not the heat of the fuel we necessarily care about, but the rapid expansion of gases that drive the pistons.
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