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Well I can't comment of the previous size of his penis as I obviously have never examined him. It is possible that his penis is retracting into this body (which can be due to obesity), but his penis did not shrink to half its size. The penis does not shrink unless he has trauma to it or has it operated on. His urologist can examine him to determine if he has a buried penis to determine if anything can be done to expose it more.
As far as operating on a hydrocele, hydroceles in adults are very different from hydroceles in children. In adults, it is a benign fluid collection that is more of an annoyance than anything else. Operations are not needed unless the patient wants it removed because it is bothering him or is unsightly to him. hernias should be repaired so that they do not become strangulated. Hope this helps.