Has anybody tried running a 1.6 16V on E85? 

Not having tried it myself, it sounds like a bad idea from every angle.

Primarily, though, the high concentration of alcohol eats/dissolves stuff that wasn't designed to resist it.  Flex-fuel vehicles have such things; your '96 does not, so you'd either have to make the effort to go through the whole fuel system, or else expect to have some failures at some point down the road. 

Plus, since ethanol has about 30+% less energy than gasoline, while being priced only about 25% less (I haven't checked the actual prices lately, so YMMV), you'll not be saving much money, as you'll be losing MPG and range and, therefore, having to buy more.  Whichever way it breaks, it's probably not worth the time and expense to convert (or accept the risk of potential damage to) your fuel system.

I agree to that, ethanol does nothing but costing more.

anybody i've spoken to that has tried the ethanol says they're mileage was reduced significantly.

I have ran it with up to a 50/50 ratio mixed with regular 87 octane.  It really had no adverse affects on running, performance, etc.  I generally only run it for a tank, then run straight 87 octane, since usually where I get it is on a 300 mile one-way roadtrip. 
Mileage is usually about the same or maybe a couple of MPG less than straight 87 octane. Some vehicles will throw a CEL because of the E85, but mine didn't....even with the 50/50 mix.
They do say if you run a lot of E85, you should change out the fuel filter shortly afterwards because it supposedly loosens up the crap in the fuel tank and lines and will sometimes clog or partially clog the filter.

I did a little searching, and found that you can safely run 30% ethanol.  I have done this since March, and little or no diffrence in power, and no MPG change. The tricky part is being able to figure how much gas you will need to fill up.  Also I have only found 2 gas stations in my town that sell pure gasoline, not 10% ethanol.  There is a garage in colorado springs that will convert most vehicles 1990 and newer to flex fuel.  I will cost about $550 to do my 95 kick.  The 2002 town and country will cost $650, which would pay for itself in a year with the amount of miles driven, and the lower price of the E85. 

I've "heard" recently, like yesterday, and from some dude I don't really know on the internets, kinda like you guys, that a properly converted/set up engine can regain most of the power and mpg loss by increasing the timing and, if possible, compression, as the E85 runs 100-108 octane.  I dunno.  It's definitely not on my list of future mods.