Is a 1.65hp variable speed right for a 20x40? It seems small.

For general circulation and filter any pump will do. I have a 20k pool and am running a 1/2 HP two speed pump on low most of the time. But with a VS pump keep in mind it is variable so you decide the actual "size" with RPM setting.
 
As a followup to this, the 1.65 is awesome. I run it 12 hours overnight at 800 rpm (120 watts), then 10 hours at 1600 rpms to generate chlorine, and then 2 hours every evening on high for the heck of it. My bill is 25% of what it used to be and all is well.
 
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