I read a post that was put up here a year ago relating to octane and ethanol. I'd like to add some other input to that post and responses. Back when gas was leaded, the compression ratio for a daily driver could be as low as 7.0:1. But now days what comes out of the pump does not burn efficiently in engines with lower compression ratios. A compression ratio of at least 8.5:1 delivers better power and maybe better MPG's. That is the reason most of today's production vehicles come from the factory with 180 PSI and higher ratios. However, the engine must be in good tune, valves set correctly, dwell and timing correct, carburetor or carburetors jetted and adjusted properly. If all of these parameters are not met, one should not expect a miracle, it must all be right. Ainokea   

Regardless of how it runs with fresh 10% ethanol gas, you do not want to fill the tank and let it sit for a few months.  That stuff gets really nasty really fast.  After a year, you might as well have poured varnish in the gas tank.  Been there, done that. 

I'm glad your 63 runs very well on 10% ethanol. Your compression ratio is probably down in the 115 to 120 psi range, or maybe a 7.4: 1 ratio and will not experience the problems of a bigger engine supporting a lot more than 1200cc's. Adding ethanol to pump fuel has been proven to be more of a detriment than a benefit. It does not burn efficiently, it corrodes fuel lines and the aluminum used to manufacture carburetors. You cannot use it in a boat that has a fiberglass fuel tank as it will cause catastrophic engine failure. Ethanol does not improve MPG's and costs more to manufacture per gallon than gasoline  Even carburetors built in Brazil under the Brosol label have had problems with their carburetors utilizing foam floats sealed with an epoxy of some kind, when ethanol eats the epoxy off of the float, it becomes to heavy to contact the needle and seat causing the engine to run very roughly, flooding and cutting out. The fuel lines in your bug are effected over time, that's why I change mine every year.

We used to pour a bottle of rubbing alcohol in our tanks once in a while. The idea was that the alcohol would absorb any water in the tank and then mix with the gasoline and so keep the tank water-free.
Maybe I could pour a little water in my tank to absorb the alcohol...

I used to do that too.  It was a trick my dad passed on to me.  I don't know that it really did any good, but I don't think it ever did any harm.  The difference is a bottle of rubbing alcohol is a few ounces and I was mixing it in a 20 gallon tank on my 64 Buick.  It wasn't anywhere near 10% and I only did it occasionally, not every fill up.
 

This was a semi-controlled experiment in an old garden shed, so take it for what it is worth, but I think any water in a fuel tank will probably stay there until the tank is drained.

  That's why I used to run out of gas all the time . . . to keep the water from building up in my tank!  That, and I didn't have a working gas gauge or odometer.   

Another way for water to get into the tank is if one removes the tank to replace the master cylinder and leaves his tank in the driveway for a few days.
Oh yes, and it rains....
I've heard this could happen if one were a slow mechanic....