Olympus always used to do compact SLRs better than anyone. With the E-series DSLRs, they grew just as large as everyone else's.
Gee, I dunno. The first few generations of Oly E-DSLRs weren't compact, and were also shaped just plain strange. Another clear example of Oly thinking outside the box, not always successfully, IMO. But Oly was the king of compact DSLRs when the E4xx series debuted. Canikon did respond with their own compact entry-level DSLRs, but an Oly E450 w-25/2.8 pancake is still a significantly smaller DSLR than anything Canikony (why not add Sony?) offers.
BTW, while looking into this, I find it instructive that the E1 debuted in 2003, the E410 in 2007, the EP1 in 2009. Compared to the good old film days, technology is marching at a very rapid pace.