Casing window sidetracking is a key technique for tapping remaining oil in small-scale enriched zones, such as minor anticlines and thin interbeds. While reaming-while-drilling (RWD) technology can mitigate issues like wellbore necking and stuck pipe caused by narrow sidetracked holes, conventional RWD tools are often excessively long, failing to meet the demands of high-curvature window side-tracking operations. To address this challenge, this study systematically investigates the structural principles and mechanical performance of hydraulic RWD tools. Through theoretical analysis, structural design, and numerical simulation, a novel micro hydraulic RWD tool activated by differential pressure was developed, followed by prototype fabrication and laboratory testing. The research results demonstrate that: Cutter stress analysis reveals that axial stress on arm is proportional to the cutting arc angle, while cutting resistance inversely correlates with it. An optimal 35° cutting arc angle minimizes resistance and prevents tool failure caused by locking ball bearing damage. The locking mechanism employs a line-line contact design between ball, housing, and sliding sleeve, effectively avoiding stress concentration and plastic strain. Based on hydrodynamic theory, the influence of the sliding sleeve's inner diameter on flow velocity, pressure differential, and total head loss was investigated, establishing a design methodology to ensure stable tool activation while minimizing energy dissipation. Applying thick-walled cylinder elastic theory, an interference-fit length calculation model was developed for the sleeve-housing interface. This methodology effectively prevents premature tool triggering while guaranteeing reliable arm retraction performance. Laboratory tests confirm successful tool activation/deactivation at theoretical flow rates, validating the design methodology. This study provides theoretical foundations for slimhole RWD tool design, enabling customized reaming applications. Its technical solutions hold significant economic and practical value for precisely exploiting residual reserves in mature wells and enhancing reservoir recovery efficiency.