That's a tough one. The Keith McMillen controllers are pretty small (for the number of buttons) and I've heard they are easy to use by hand:
www.keithmcmillen.comIf it was something to sit next to the keyboard, his QuNeo might be the ticket while it also opens up other creative possibilities. Also, on the floor, check out how small and thin his SoftStep controller really is. Might be something you can stack above another foot controller.
The afore mentioned Peak controllers (
www.peak2005.com) are small and powerful, but clearly meant as foot controllers and the switches do travel a fair distance. However, the switches are very easy to press, not stiff or clicky. Maybe you can put some sort of rubberized covering over the switches that decrease their travel and make them easier to press?
Also, I very much like the suggestion of a drum pad controller. I think there are various hand-based edrum controllers that can send MIDI.
If you are going to end up spending too much money for a new controller, how about an iPod Touch? Run an instance of SLM on there and have it link with your iPad. I haven't done the link yet with two instances of SLM, but it sounds intriguing. I'm sure Arlo likes this idea :-) Also, there are various MIDI Control apps you can run on an iPod and hook it up via MIDI if wireless isn't an option.