Seems like the OP is tied to the hardware and has to pull some magic to get things working so the suggestion of another cpu is of little help - especially an AVR as these can't execute code from ram. Yes, an ARM would solve the problem nicely and probably cheaper than an AVR.

The OP can't seem to get past the concept of the hex file - as Andy has been stating, why use a hex file? Why not just have the binary image that the compiler/linker can output or if not a utility like hex2bin can convert, if anything, the binary image will be smaller than the hex file. Then to load the image, the 8051 based unit simply reads the binary image file and loads it into ram at the correct address - no interpreting of the intel hex file stuff needed. Once loaded, it can be executed. Personally, I'd add a checksum/CRC or some other means of checking the loaded file before it is executed as well as a signature of some sort so that not just anything can be loaded. This all reminds me of the Nintendo Gameboy with its game cartridges.