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The apparent true story seems to be more of a frustrated joke than anything serious. The optics capable of what you speak would have to be far larger than what is currently in space, Spy satellites are not all about putting the biggest camera on the front possible. In terms of optics, spy satellites actually have a couple of lens elements to allow focusing on something that is fairly close, at high accuracy, while also collecting enough light.
Hubble is simply not big enough, and the facilities used to grind large mirrors for possible use in spy satellites are commercial ones. Hubble could have been alot cheaper to make if the design for the mirror was something like 1 inch smaller diameter. Why? well because the company who made it already had things set up to fill a military contract order.
An improved replacement for Hubble doesn't need to be bigger. What it would have to be is two or three slightly smaller hubbles that have onboard atomic clocks that are precision stationed from each other (possibly using lasers) so that accurate interferometry can be done. Supposedly there is a series of downward pointing sats that use such methods,