At last I've figured it out. If you set EX OPT ZOOM to ON in the REC mode menu, and then choose an aspect ratio smaller than L when you press the shutter button you will get a 2x zoom factor with no detioration in picture quality. For example, Set EX OPT ZOOM to on in REC menu, then go to quick menu, scroll along to ASPECT RATIO, then choose MEz, or SEz. In effect then your 20mm pancake lens becomes a 40mm pancake lens with 80mm equivalent. Seems quite useful to me.
The 14-42 lens will then give film equivalent of 56-168.
There is also an option for greater magnification (see Page 51 of manual) but this includes digital magnification which degrades the picture so in my opinion not much use.
I hope that this explanation is not harder to understand than the manual.