O2 can be used in moderation [1-2% even 3% by voume] ............the problem is how to create an oxygen carb to match O2 flow with airflow and rpm. PLUS how to enrich the fuel by the same % as the O2 is added.
The same situation as Nitrous without the benefitial evevaporation and cooling effect.
Also Nitrous doesn't decompose into N2 +O2 until way into compression stroke and after the plugs have fired ~~600F+ so it is much less likely to preignite than just adding O2 to incoming air.
If you think about the effects of baraometer study: Dead Sea SHORE and it's higher oxygen level [1-2%] due to below sea level.
http://en.wikipedia.org/wiki/Dead_Sea