Yes, that's why I bought the Panasonic GX85! I can fit it into a small point-and-shoot case with the 14-42 EZ.I had the 5MkII and now have the 5MkIII. The grip on the III is better, both the front 'bulge' area and the rear thumbrest. It's easier with the 12-40 on it than the MkII was... but I also had the extended grip on the II. I got the grip on the III as well, and it's very comfortable. I still think without the grip, though, the camera feels better with a small prime or a small zoom. With the 17 f/1.8 or the 14-42EZ on it, it's almost pocketable!
I almost went for the E-M1 MK II because of that lovely large grip. But in the end, the E-M5 is a better match for me. I'm going to wait for the new grip to go on sale, as I can't bear the thought of shelling out another $225 for it. The new 12-45mm f/4 PRO zoom might just be the perfect balance (but the last thing I need is another "standard" zoom in my arsenal... ).