While a rangefinder may be "stealthy" compared to a typical SLR, and I strongly suspect that
any digital compact trumps anything you have to hold up to your eye to compose with. I can traipse the boardwalk or a city street, holding my LX1 out at arm's length, all day long without collecting a stare - as long as I'm using it, I'm disguised as a tourist.
Is there such a thing as a pocket sized digital camera with good optics, good sensor, good 400 ISO performance, fast autofocus, and manual controls.
Short answer: no. There is no digital compact that isn't a study in compromises, nor is there likely to be such a thing in the foreseeable future - two microns is not a lot of space to cram a pixel into. The question is not whether you have to sacrifice a feature you can't live without, but just how many such features you stand to lose. Exhausted from your search? I understand a number of photographers determined to find the ultimate pocket cam were last seen in the company of Vandervecken, Ponce de Leon, Don Quixote, and the Wandering Jew...
FWIW, my take on the LX2 (based on LX1 experience plus LX2 specs & image samples), which you've probably ruled out already, but just in case:
pocket-sized - check (pants or jacket, not shirt)
good optics - check (superb would be a better descriptor)
good sensor - not for noiseophobes
good 400 ISO - not for noiseophobes
fast autofocus - good for a compact (better than some dSLRs?)
manual controls - check (best I've ever seen on a compact)
and may I add?
LCD quality - is wowing early adopters
Storage - uses good ol' SD and SDHC
Battery - not best, not worst
Addictiveness - extreme (I have 3 SLRs collecting dust)
More on IQ: The recent dpreview.com
review of the FZ50 should give you a good idea what the LX2's IQ is like. Same Venus III LSI; very likely same imager except aspect ratio. Be careful to distinguish between JPEG and RAW results. There's long been an affinity between gritty b&w film grain and street photography. One can shoot RAW, then apply a fairly aggressive chroma NR, leaving film-grain-like luminance noise with minimal loss of detail.
More on focus: Some have reported that using image stabilization increases the camera's shutter lag. Zone focusing is a joy - just prefocus on something at about the distance you expect to need, then flick a switch on the lens barrel from auto to manual focus or - better - press the configurable AF/AE lock button. Combine that with the oceanic DOF of focal lengths that range from 6 to 25, and you've got something.
One downside of the LX1/2 as a pocket cam is that it's fairly pokey to start up, given that the lens cap has to come off for best results and given the leisurely pace at which the zoom unfurls. I'd say 2 or 3 secs before you can get off your first shot. That's pretty painful if you've just spotted a UFO or Yeti.
BTW - Is the M8 the world's first DNG raw camera?