Regarding f/2.8 and 1/20" being too slow for "people" shots:
First, I'd agree 1/20 isn't going to stop motion. But if you can ask people to hold still, or don't mind waiting for the right moment, it's still plenty fast. I've got plenty of shots of musicians in performance at 1/20" (shot with longer lenses, at that) that are as sharp as I could reasonably ask for. For instance, this one with the M135/3.5 at f/3.5 and 1/20":
Of course, I had lots of similar shots that didn't turn out as well, but luckily, I had plenty of opportunity over the course of the evening. With candids, it's not so cool to have a lot of shots not come out well because of blur - you might miss the best moments.
So I think it important to emphasize that when I said 1/20" was fast enough, I didn't mean to imply that this was fast as you can get at f/2.8. On the contrary, it's only the darkest rooms that can't give you faster shutter speeds. "Most" of the time, it's quite easy to get shutter speeds of 1/45" or 1/60", even without resorting to ISO 1600. For instance, this one is 1/45" at ISO 400 (and is actually stopped down to f/3.5), and was lit primarily by window light:
Or this one, lit by an ordinary living room light fixture, taken at 1/60", f/2.8, and ISO 1600:
So I'm not saying there aren't *some* situations where f/2.8 isn't fast enough. But considering how much I debated this before buying the lens, I am constantly and pleasantly surprised at just how seldom it is actually an issue.
Note also the extremely fast AF of the DA40 (probably the fastest of any Pentax lens) makes it possible to get some shots you might miss otherwise, and this can sometimes make up for some of the shots you lose due to blur.
I'd just reiterate that between the DA40 and FA35, there are tradeoffs, which Steve summarized nicely (except for leaving off the incredibly fast AF of the DA40). It's not like either lens can't do the job at all; it's more a question of which compromises you are more willing to make. And I'm just trying to argue that the f/2 versus 2/8 compromise is not *tht* big a deal in practice.
Now, regarding the various 50mm lenses, I'd say that while these are great to have, they are often too long for indoor candids. Some would say that about the 40, but I guess it depends on your style of photography. I generally like pictures of people to have the person dominate the scene, and I tend to like to hang back several feet away - an oserver, not a participant. 40mm is perfect for me most of the time. But I'm glad I have my M28/2.8 too for when I want something a bit wider.