First, I had the Oly 14-42 II came with my E-PL3. Super lens. Yes, some primes could beat it, but not by a lot.
I currently have the Panny 12-32 which I use with my GX7 (mainly). Now -- the dirty little secret no-one talks about much, this lens is subject to shutter shock with mechanical shutters in the 1/60-1/320 range. Not always and not at every focal length (in my experience) but in some situations, the difference between mechanical shutter and electronic shutter (which cannot cause shutter shot) is chalk and cheese.
Check that with the camera on a tripod.
Shutter shock could be a problem with the Oly 4-42 II lens as well.
Having come up bad on both these lenses, I would suggest you need to look at shutter shock, your camera (is it working right?), and repair/replacement of the lens.
Having said that, I have seen good reports of the Panasonic 14-42 II (not the original, never the original!) which put it in the stellar category. The Panasonic 12-60 (not the Panasonic Leica one) also seems very good, judging by posts here.