I think what it boils down too is E-85 quality. It 87 mixed with ethanol. Perhaps other states use higher quality base fuel to mix with ethanol. I'm in Canada and the E-85 in my region wasn't impressive.
It was about equivalent to 100 octane gasoline at best. AV gas alone at 104-108 octane was far superior.
But I was running 2.6 pulley with the worst possible set up for KR. Just so you know Ethanol although very high octane, the threshold for knock resistance in some situations is much lower than Leaded race fuel. Leaded race fuel tolerates leaner mixtures a lot more than Ethanol. Also leaded fuel tolerate higher intake temps than E-85. E98 or pure Ethanol is another story. The little bit of cheap unleaded fuel is what causes the knock.
So you could be too lean at the moment. Way too rich can cause rich knock as well. You need to provide A/F ratio data.
In your case with the 3.5 and your mods you should never see any knock. What's your A/F ratio I don't think you answered this yet ?