Yea, I was watching the exposure guide line at the bottom of the screen, adjusting the aperture until it was dead in the middle. However, I was also expecting the image brightness to change as well. And now I know why the brightness remained the same. I looked carefully at the front of the lens while I released the shutter - both at maximum aperture and at minimum aperture. And it was pretty clear that for most of the time, the aperture blades remain wide open and only close during the exposure - just like with an SLR.
Before I bought the G2, I was assuming the opposite - that the stock lens would always been in 'stopped down' mode because really, there's not much need for it to behave like an SLR - because it's not an SLR! With a single lens reflex viewing system, obviously the main reason why the aperture blades are wide open most of the time is so that you can view the image with maximum brightness. Well I guess also there is the added benefit of seeing the image with the shallowest depth of field to make focusing more accurate. Maybe that's why Panasonic opted for wide open aperture viewing with these cameras - for the shallow depth of field / focusing issue. Even so, I was expecting the aperture blades to behave like those you would find on a video camera - being in 'stopped down' mode continously.
I had been planning to do a lot of time lapse with this camera. Though the aperture issue with the stock lens may increase the chances of flicker. Not the end of the world because of course I can use my selection of Canon FD lenses when I buy an adapter and not worry about any fluctuations in aperture size. Though the G2's depth of field preview mode could potentially be a workaround to using the stock lens for time lapse. However, according to the instruction manual, when you're using the depth of field preview, it's the leaf shutter blades that close down instead of the aperture blades. Very strange...I don't really see the logic in that.