The gene responsible for hairlessness is one that has some morbid effects. It is lethal when homozygous (when the embryo inherits two alleles) but these pups simply aren't born. The hairless gene can also cause underdeveloped ear canals and eye tissue, and is also implicated, of course, in the eternal bad skin problems most hairless dogs face.
Crested breeders do address these problems quite proactively. One of the reasons I like the breed is they are quite sensible about showing - their standard allows wide lattitude to ensure the health of the breed. It emphasizes almost exclusively structure and movement and judges seemed well informed. No color, hair type, or variety has emerged as an "unwritten standard" to narrow the gene pool and cause breeders to follow an extreme fashion at the risk of future breed health.
Breeding for more hair, rather than less, means a healthier dog. It does mean that responsible breeders have to turn away potential pet customers who think the hairless dogs are low maintenence - the way they are bred it's actually the opposite, in order to protect the breed's health.
With regard to downsized working dogs: there actually is a place for these dogs in the working world, if breeders would get serious about producing such dogs and not toys to appeal to the general public. It's true that I can't imagine the overall usefulness of a downsized draft dog. However, for most other working environments, the convenience of a small dog may be very appealing to some people. They don't eat much, usually, and are easy to transport. This is how we got Shetland sheepdogs, Swedish Valhunds, and Corgis, to begin with. And wasn't the Jack Russell a slightly scaled-down Fox Terrier?
Working characteristics would need to be of primary importance in producing such a strain in which small size (but not dwarfism, which hampers working ability) was set. But it could be done and it would have some potential in meeting the needs of working people with limited resources, performance people looking for that small auxilliary dog to fill a limited space, or those crazy urban dwellers who simply want a working dog as a companion (yup, they exist and do know exactly what they are getting into!).
One key point would be that such dogs never be shown in conformation, where size and "cuteness" would become of primary importantance. Witness the Shetland sheepdog, once a useful little all-purpose farmdog but has lost its instincts and sensible nature for almost a century now. And the Corgi, which once had real legs capable of fancy footwork behind cattle and doing the very long and fast blocks needed for real cattle work - forget it now!
There's two new breeds, that I know of, emerging from the Border Collie at the moment. One is a strain of pure BCs, similiar to the emergence of the Jack Russell terrier - engineered by a single man and carrying his name, McCallum. They specialize in working cattle but are capable of the work all Border Collies do. This strain has been emerging over about 40 years, but they have just recently set up a formal registry. My unregistered pup's dam is a McCallum.
The other is a crossbreed of Kelpies, Border Collies, and Catahoulas. There was an Aussie in there, too I think, but the Catahoula and Border Collies were the main base stock of the breed. The goal was a dog with the extreme endurance and drive of the cur breed with the trainability and gathering skills of the Border Collie. These dogs are specifically bred to work tough range cattle on huge operations in very rough terrain. I've never seen a Hangin Tree dog but most people I've heard talk about them say they are solid working dogs.
One reason people will start a new strain of dog, other than designer breeders looking for a quick buck, is when a breed has become to unfocused in its breeding goals and it becomes difficult to find a pup to suit one's purposes. With security becoming more of a priority in today's world, I predict there will emerge some specialized strains of hunting dogs bred to do detection work, SAR dogs, and of course protection dogs. I think the protection dogs are there to some extent but I happen to know there is a crying need for consistent results from labs and other hunting breeds to produce that strong work ethic needed.
A friend of mine last year was scouring the country looking for rescue labs and other labs that had evidence of being high energy. Her job was to locate these, evaluate them, put basic training on them, and send them on for airport security work. The company she was working with needed
four hundred dogs in a single year! My friend is VERY good at finding dogs, but she couldn't do it, not anywhere near. She didn't renew the contract because she is a BC person and much preferred working with them, and besides the contract had turned into a full time job!
I predict some wise person will see the need for a dog with the scent drive of a hound, the trainability of a lab, and the work ethic of a Border Collie or Belgian breed, and develop a strain of dogs specifically for bomb detection.