Yes, very possible! Works in all transmitters (DC/DS-14/16/24), works with R-series and REX-series receivers and should fit in about everything:
Accuracy is one meter and reading based on tests is very accurate. So head on to project-page and read more or make your own!
Nice Project, I was wondering whether an Attiny85 could do the same job which would make the Altimeter even smaller :).
Keep going!!
Both yes and no actually. Arduino Mini Pro is small, has voltage regulation built-in (straight from RX-power works fine) and is user-programmable without bigger hazzle.
Don't worry about the size, there might be something coming at some point :)