No, it does not. This myth will not die hard.
It's not a total myth per se, because it once was and sometimes still can be true for engine components that are simply not designed to handle ethanol.
Such is not the case for pretty much every car built after the year 2000, roughly speaking. Every soft component in modern cars is designed to handle at least 10% ethanol, and effectively handle 100% ethanol.
Corrosion is not really an issue either. The E85 you get from a pump is anhydrous, and the only way you'll get things like phase separation is if water is added deliberately. Ethanol doesn't pull water into gasoline. That's a myth. It's not a dessicant. This topic has been studied and it's simply not worth worrying about.
Most cars on the road today, including those that aren't Flex Fuel, can run somewhere between E30 and E50 with no problems whatsoever. They can even run on E85 or E100 with either a software update or a piggyback device between the ECU and the fuel injectors, everything else remaining OEM.
A car running on ethanol won't rust, fall apart, or blow up. If anything, ethanol can be better for engines given that it burns cooler and leaves way less carbon deposits.
If a small engine today has seal failures or other issues, it's more likely to be the BTX (benzene, toluene, xylene) in gasoline and not the ethanol component.
By the way, I'm speaking from direct experience. Not only have I converted small engines to run on ethanol, but I converted my 2013 Hyundai to be a flex fuel vehicle.