Are Olympus flashes fully compatible with this camera (full feature set available)? I get conflicting information all around, some people saying the Olympus FL-36r will do fine and others not. The FL-36r seems like the flash to use if it is compatible with the various automatic modes.

If not, what flashes are available with the ability to use bounce flash? The built-in flash just isn't cutting it for the work I do. I'd like something reasonably small, ie. canon 270ex size if possible.

Yes, the G series are totally compatible with the 4/3rds flashes. However the R flashes have extra capabilities that are not supported by Panasonic (the wireless TTL).

You can also buy the Panasonic flashes, which are rebadged versions of the non-R FL-50 and FL-36. Wireless TTL is the only difference.