The main reason E10 can't be used in a mogas powered aircraft is due to the vapour pressure of E10 which increases it's susceptibilty to vapour lock in the fuel lines. A little water in the fuel system with aircraft's standpipe fuel pickups and low drain points isn't a big issue.
In the AVGAS fuel contamination 'epidemic' about 10 years ago the solution was to flush the entire fuel systems with water. For the next 2 months or so every day we were draining about half a litre of water from the tanks before every flight!
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