So that refrain seems to imply the 20% project must be done as additional work after spending 40 hours a week on the 100% project. My point was you actually can spend roughly 32 hours a week on your main project, if you are performing well, and then roughly 8 hours a week on your 20% project, and still get high performance ratings.

But do managers adjust their expectations of your main project to 0.8 of expected output?

Sure if you can get everything expected of you done in 32 hours, you can spend the remaining 8 on something else.