I have just tried it on my FG. If I put the ISO switch to the FG setting and the power switch to M/TTL, it appears to work. If I start wide open and gradually close down the aperture, I will reach a point where it will not signal that enough light has been received.
If I then increase the ISO on the camera, it will then reach a point where it will show that enough light has been received again.
Therefore, I think it's working and I have it set up right. I assume it will work the same way with the FE2.
I assume that if you wanted to use it as fill flash, you would have to set the camera's ISO dial to a faster speed than the film you are actually using... although that would make the camera's meter wrong when trying to measure ambient light.
I initially thought that if you were using e.g. ISO 100 film and had the camera set to 100, you could set the flash to 200 or 400 for fill flash but the camera will still think it is controlling the flash for ISO 100 film. It can't know what the flash is set for.
EDIT: Just confirmed this. If it's switched to M/TTL, it is only TTL if the ISO switch is set to the FG setting. At all other settings of ISO on the switch, it fires full power in manual. It only uses the ISO setting in one of its three auto modes.
Perhaps it's better to use one of the coloured modes using the built in sensor in the flash for fill light.