Listen directly from the horse's mouth will answer your questions!
If you click on Bananadiver's Flickr : http://www.flickr.com/photos/banana_...7622501203800/
You will read about his approach in photography. He probably did the above shot with a 50mm unlike the guess of a 85mm or something tele. Good close-up street portraits of strangers using 50mm or 35mm/28mm wide angles are commonly done. Just do a check on Flickr. To do good shots like this, 1st is you must have a genuine interest in people. Then you communicate with them to share your sincere concern and ask for permission to photograph them at close distance.
Regarding nice bokeh or lousy bokeh, NOTHING beats a good close-up of a subject with eye contact and emotion-evoking expression. It's never about the best lenses but it's about your approach.
Sigma 30/1.4 is 48mm on your 500D, you are right. And that's like a 50mm standard. It's closest focusing distance is 40cm which is actually very close. Most standard 50mm lenses' minimum focusing distance are between 45cm-50cm for SLRs and 70-80cm for Rangefinders. Read here: http://www.kenrockwell.com/sigma/30mm-f14.htm You can already shoot close-up of a cup on a table with your 40cm closest distance. Macro is altogether for a different purpose: extreme close-up on minute subjects like insects.
I see totally NO ISSUE on your combination of 500D and Sigma 30/1.4 to achieve a similar shot like bananadiver's.
"Sweet spot" usually refers to the optimal sharpness of a lens at a particular aperture. If you read here: http://en.wikipedia.org/wiki/Aperture , you will also read this: "There is accordingly a sweet spot, generally in the f/4 – f/8 range, depending on camera, where sharpness is optimal, though some lenses are designed to perform optimally when wide open. How significant this is varies between lenses, and opinions differ on how much practical impact this has."
So, in actual fact, when it comes to portraits, most people actually like it soft at the corners, even vignette with black corners, shooting wide open to totally blur out the background, and achieve just the subject's eyes and face sharp. It is subjective to individual's style. It's NOT just the bokeh, the lens or the camera, BUT the photographer's communication with the subject and his approach.
As to using flash, I would suggest you learn from the basics of judging natural light source: the Sun, also constant light sources like lamps, torch lights, etc... BEFORE learning about flash which you can't predict well where the shadows fall. Learning about lighting is learning about shadows.
As to achieving contrast, a lot has to do with lighting: the way your subject is lit. The type of film used/the post-processing in computer also will add or reduce contrast.
Lastly, to really learn the right stuff, these are good resources which I have pointed out:
MUST READ is : http://www.kenrockwell.com/tech.htm