I'm fully aware that you can focus with the AF-On button on the 40D during Live View, but that has nothing to do with moving the little window around on the Live View display. The AF can only function on the 40D by using (one of) the standard 9 AF points. Actually, it might be the centre point only but I'll need to double check that.
On the 40D the moveable window is only to position the 5X and 10X magnifier to wherever in the scene you want the magnification to take place. That is to facilitate accurate MF, or to verify that AF has given you the result you want. See page 110 of the manual for this operation. Moving the magnification window does nothing to change whereabouts the AF itself operates.
Once the custom function is set to enable AF during Live View then it stays set. Your first post stated that the custom function gets reset when you exit Live View. I don't believe that is true. Perhaps the magnification window gets re-centred, but you do not lose the ability to AF during Live View one you have enabled it. In fact, if only the centre point is used for AF in Live View then it would make good sense for the magnification window (focus frame if you must) to be relocated to the centre when you exit and re-enter Live View mode.
I'm sorry if my earlier message did not convey what I meant very well.
Just for clarity (I hope) the 50D has two main flavours of AF while using Live View. These are known as "Quick Mode", which works in a similar way to AF on the 40D and uses one of the nine normal focus points. I'll have to check but I think you can select which of the nine is used. There is also a new type of AF called "Live Mode", which does focus exactly where you position the magnification window. This extra "Live Mode AF" function works on the 50D because any part of the sensor can be used to perform contrast detect AF, just like a compact camera. The 40D does not have the hardware/software to AF in this fashion and thus it is not possible for AF positioning to follwo the magnification window. There is actually a "Face Detect" Live Mode on the 50D, which I'm sure is nice for somebody, but I don't use it.