50mm f1.4 would in be a better combination to give you more depth of field control (i.e. more blurred out of focus areas) but I haven't tried the Canon lens you mention - there is a Hexanon 50mm f1.4 available and others.
Konica 40/1.8 is really soft at 1.8, but gets really sharp at 2.8 Bokeh wise is not very good, Mike Johnston gives it a 3 out of 10. So it might not be the best for Portraits.
Canon is also soft at 1.4-2, bokeh is a little better I would say.
You should also consider Super Multi-Coated Takumar, much smaller than Canon, focusing is extremely pleasant and smooth, bokeh is smooth. It has radioactive element that turns the rear element yellowish though, but it can be de-yellowed by placing it under UV or sunlight for a few weeks.
I would go with the Canon 50/1.4 FD lens. The older FL50mm F1.4 is larger and a bit heavier, uses 58mm filters. The original chrome nosed FD and "SSC" lenses with the breech-lock mount are a bit more solidly made than the later ones.
I just switched from 4/3rds to an EPL1 and I have been looking at the same choice. I too want a nice walk around lens. I like to do flowers, closeups and portraits (usually animals). I have the Canon 50/1.4 and haven't even considered it as an option. I've used it on my film cameras and unless it is dramatically better on my EPL1 then its nothing to write home about. The Konica 40/1.8 is REALLY sharp when stopped down a bit (although it has an odd swirly bokeh). I ended up looking at a Pentax Super Takumar 50/1.4 . The samples I have seen of it paired with an Olympus PEN are really lovely. I have also been looking at a Konica 57/1.4. It has lovely bokeh in the samples. I would think either would make an ideal portrait lens.
I am finding the Pentax running a bit more than the Konica 40/1.8 and less than the Konica 57/1.4.
or close up on the cheap...picture taken with my Prakticar 28mm f2.8 wide opened hand held on my E-P2. Love the Prakticar's minimum focusing distance of 0.75 inches!! Figurine's head is about 0.5 inches across... hee hee
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Lots on sale at ebay...check out item 120610998048