Concept: 3 out of 5
Execution: 3 out of 5
Yeah, but: 'Perfect' can mean 'best compromises', too.
The Long Version: It doesn't look like a monster, but it is: the Lumx G 20/1.7 is perhaps the single best lens available for micro four-thirds cameras. Coupled with the GF1, this little lens has made Panasonic a dominant force in the mirrorless market segment.
Physically, the 20/1.7 is a compact and solid little lens. Its 20mm focal length slightly wider than the traditionally-accepted 'normal' focal length, but in fact it's almost exactly what a normal lens should be - the 4/3 sensor is 22.3mm diagonally. While the whole 'normal' legend is a bit overblown, it does have a remarkably useful field of view. Not so long that there's no context, and not so wide that perspective becomes a special effect. Despite having the 7-14 and 14-140 in my collection - and another eight lenses that mount via adapters - the 20/1.7 is the lens that spends the most time on my GH1 and captures more than half of its photos. I even love the look of it on the camera: I can't help thinking of a little bulldog.
There are several optical tests out there already, and I won't be adding to them since performing any serious optical analysis is far beyond my capabilities and inclination. There's falloff visible to about f/4, and I can confirm that the lens is a bit softer wide open than at f/2.8, with a little less contrast wide-open as well. But sharpness isn't a problem at any aperture, at least until diffraction kicks in, although for absolutely critical work it's worth keeping in mind. Naturally, for absolutely critical work you should also be using a tripod and a cable release. Once that's taken care of, then picking the right aperture becomes significant - until then, use whatever aperture fits the picture.
The actual act of picture-making with the 20/1.7 is a joy. Putting this little gem on my GH1 gives me a strikingly capable camera that only weighs a touch more than the MB-D10 grip for my D700. That's absurd. Image quality that's this good simply shouldn't be capable with such a petite setup. White its autofocus is neither as quick or as quiet as the 14-140, when it's on the camera the 20/1.7 mostly 'goes away' and is effortless to use.
Part of the transparency of using the 20/1.7 is because it's a prime; zoom lenses always require attention from the photographer, and add another decision to the list. After all, a zoom is what you bring when you don't know what you need: there's an inherent element of uncertainty and hedging with them. Photography with a prime lens means that you either do or do not: there is no trying different options. I find that coming back to the 20/1.7 from one of my two zooms always leaves me feeling a little relieved - I know what to expect when it's on the camera.
About the only thing that I really wish was better on the 20mm pancake is its autofocus speed. It's not bad, and I certainly wouldn't call it a 'weakness', but if there was any way to give it the speed and silence of the 14-140 I'd be all over it. The catch is that if it increased the price, then the excellent value of the existing lens might not be preserved - as always, there are compromises to be made.
While the little Panasonic is almost completely resistant to flare, I have been able to provoke it once or twice. Each time has been while photographing at night, with strong lights just outside the frame. Even though a lens hood would be useless, I still wish that there was one available simply to protect the lens. I had to re-learn how to hold the camera to keep my fingers off of it, and spent a lot of time in the first month with smudge marks across the front element. A small metal screw-on hood would be perfect.
The predictability of a prime's field of view is a huge asset. People can be glib and say 'zoom with your feet', but that misunderstands the character of a prime lens. Try this: pick a zoom - a superzoom like the 14-140 is great - and zoom in on a subject that's some distance away from a background with detail. See that the spatial relationships within the frame never change; it's just like cropping an image that's already been taken. Now set that zoom to a single focal length, and see what happens as you physically move closer or farther away. All of the spatial relationships shift; just a few feet of movement can create an entirely different image. If you need an excuse to zip around the room on a wheeled office chair, this is your chance.
So don't think of zoom lenses as being gadgets that bring far things closer. Think of them as tools that let you, the photographer, choose the spatial relationships in your images. They're powerful and versatile, but primes are always going to be easier to use. After all, even if you already know what you want when you walk into a restaurant, you'll probably look through the menu anyway. But I digress.
One thing that I haven't mentioned as an advantage of a prime lens is sharpness - while the 20mm f/1.7 has plenty of it, so do certain zoom lenses, like the 7-14 and 14-45. What the Panasonic pancake provides is better brightness, being more than two stops faster than the fastest m4/3 zoom. That alone would make the 20/1.7 an important lens to use in a format with such generous depth of field, no matter what its focal length or sharpness is like. It's nice that there's no need to compromise.
The 20/1.7 has got to be the best thing that Panasonic has done recently. If it wasn't for such a high-quality little lens on the GF1, the Olympus 17mm f/2.8 - and the cameras that come with it - would have made a much bigger impression on the market. The Pen series are very good cameras, but the 17's only a modest lens, and even a quick comparison comes out in favour of the Panasonic. The system is still new, as is the whole category of mirrorless interchangeable-lens cameras, but I expect the 20/1.7 will be one of the stand-out lenses for a very long time.
(At least, a long time in digital years.)
You may also be interested in the thewsreviews' illustrated collection of observations on a wide assortment of lenses: "Quick Thoughts on Lenses for Micro Four Thirds Cameras".