Users want a way to express an arbitrary unaligned string of bits, with the appearance in the infoset being hexadecimal, not base 10.

Right now the only way I can see to meet this requirement while retaining backward compatibility would be a new DFDL property.

So here's the new idea:

Property dfdl:hexBinaryRep with values 'bytes' or 'bits'. New property, so defaulting (with suppressible warning) to 'bytes' for backward compatibility in schemas not having the property.

When set to 'bits', then type xs:hexBinary would behave just like xs:nonNegativeInteger, and all properties relevant to that type would be applicable, and any use of XSD length facets on such elements would be an SDE.  The hexBinary string would be exactly same as if you took the numeric value for a nonNegativeInteger and instead of presenting it as base 10 digits, you use base 16 digits.