> You need to ask why does gasoline contaminated with ethanol still exist

The two mandates that together promote this are mandates for share of renewable fuel use and mandates for gasoline oxygenation to reduce carbon monoxide emissions; ethanol-containing gasoline helps meet both mandates (the latter is applicable to certain markets at certain times of year.)

> Drivers would save tons of money if they'd refuse to buy it,

Well, yes, refusing to buy the gas that is sold at the pump would save lots of money.

IIRC, it reduces certain noxious components of air pollution like particulates at the cost of more CO2

It lowers actual octane rating, thus increasing air pollution ever so slightly.

An engine designed entirely for ethanol, not one that just merely takes a mix but is meant for gasoline, would be higher efficiency and be worth it.

Ethanol has a higher octane rating (113 RON) than petroleum, but is less energy dense (so lowers mpg.)

to subsidize corn producers in the mid-west.