I didn't get the impression the OP was using carbide bits, but I could be wrong. I wanted to offer a possible solution for his current tooling. Sharping a bit that small by hand is not a trivial task, but with a fine wheel and a bit of practice, far from impossible..
HSS bits are entirely unsuitable for the task, as witnessed by OP. Even if his sharpening skills were top notch and he had the equipment to properly sharpen such small bits, it would still be of no use. The reduction in the hole size does not come from the dulling of the cutting edge, but from the bit being abraded on its sides, reducing the diameter. You would need to grind off all the affected length before sharpening, only to get another 5-10 usable holes before having to go through the whole process all over again.
Carbide is the only reasonable way to drill PCBs. Luckily the carbide bits of quality suitable for hobby use are so cheap that the cost of buying them should not be of concern.
In hobby use, they last forever (or until you break them, whichever comes first).
I can post some pictures/videos of the little drill I use (on Thursday when I get back to work) if anybody is interested. The setup is fairly cheap, but quite effective for PCB drilling (not much else).