ricardo said:
There is a HUGE range of hearing defects and one very common one is that the patient hears stuff distorted rather than just at a reduced level.
Absolutely. the hearing process/stapedian reflex/brain can deal with 40dB anomalies in sensitivity, to the point that the patient ignores he is partially deaf. Indeed distortion is the big issue; that's why most of the hearing aids do little to solve the problems, since they just boost the frequencies that are de-sensitived, increasing distortion.
I'm not sure there's any practical implementation of distortion compensation in current hearing aids; it seems they are restricted to "frequency shaping, noise suppression, multiband amplitude compression, and frequency dependent interaural time delay algorithms".
This article (dated 2001)
http://www.audiologyonline.com/articles/digital-hearing-aids-hype-hoax-1221
shows that at the time, distortion compensation was not included in the design brief.
A more recent (2010) does not seem to offer more "The DSP implementation is manufacturer dependent. In general, it performs compression/expansion by band, positive feedback reduction, noise reduction, and speech enhancement."; it "It also processes directional information and can generate its own signals to help improve fitting a hearing aid to a patient." "It also processes directional information and can generate its own signals to help improve fitting a hearing aid to a patient." (in https://www.maximintegrated.com/en/app-notes/index.mvp/id/4691)
Page 3 of this document seems to state quite well the status of current hearing aids
http://www.intricon.com/assets/documents/uploads/Overtus_ProductFeatures.pdf
Current litt on the subject seem to indicate that your involvement in distortion compensation may have been an isolated effort that did not permeate the mainstream.
DSP distortion compensation in loudspeakers (horns) has been a fad in the early 2000's, advocated by Wolfgang Klippel; daunted by the complexity of the problem, he finally set out to develop the loudspeaker development/control platform bearing his name. It seems the data-crunching power needed for the task exceeds the resources of the most powerful DSP platforms commonly available.