Seems to me there is really no reason hang gliding couldn't be in the Olympics. However, entry is a long political haul requiring a strong organization with international leadership and well maintained sporting contacts. One look at the decentralized nature of hang gliding and the limited leadership role of the USHPA suggests we are probably not candidates at the moment.
I campaigned for the Olympics of 1980 in the Soling class--and dinghy racing is a world just as competitive and riven by personalities as we are. At the class level, Olympic sailing is just as small--there were not more than 50 competitive Soling crews in America when I was involved.
So I would look to a cadre of 50 or so of the best American pilots, with Wills Wing and the USHPA backing them, to make this pitch. It would take a whole new entity: a US Hang Gliding Olympic Committee.
They would coordinate with similar newborn "Olympic committees" in Europe and Eastern Europe and Down Under, making sure they conformed to Olympic game rules. This coalition would argue that hang gliding is a truly international sport with well established rules of competition, that scoring methods are widely accepted and secure, that fund-raising is in place, that venues are secured, and that the value of the Olympics would be enhanced by the admission of free flight, in which humans fly like birds.
Could it be done? See the list of Olympic sports here, one would have to be dislodged:
http://www.olympic.org/uk/sports/index_uk.asp
Personally, I doubt any of this would get us new pilots, since hang gliders tend to find hang gliding despite all obstacles. Nobody wants to race dinghies nowadays, either--too cold and wet and weather dependent.
If you want more hang gliders, just empty the madhouses.