I did a quick check on that PCF8574 and it appears to be a pretty neat little device, however, it's too expensive for this product.

Also using any larger micro is not an option for me as that would cause a number of problems, cost and tools being a couple of them.

The logic ICs seems like a good possibility...do you guys know of any example schematics that use this technique?

Oh and BTW, in my case the speed and software overhead isn't an issue. It could be 200x slower and it wouldn't be a problem...just as long as I can add some I/O without increasing the cost too much.

Thanks!
James