My parents have both gone through multiple sets of hearing aids, at many thousands of dollars a pop. Based on their experiences, when it's time for me, I will design my own, and to hell with how they look.

One problem with miniaturization is that putting the microphone close to the speaker is a recipe for feedback. Separating them by even just a few inches should make a huge difference.

Also, if you don't mind carrying a bigger battery around, you can throw a lot more processing power at the problem.

I've read that you can get satisfactory hearing aids without a prescription in some countries, and that they are much cheaper that way.