Creating Nodes Of A Content Type on-the-fly While Creating A Different Content Type
If you are able to use the node reference field from the References module instead of the Entity Reference once the Node Reference Create module might be of some help:

Node Reference Create is an enhancement to the nodereference autocomplete widget that allows users to reference non-existent nodes.
When no matching node is selected, the new nodes are automatically created allowing for a seamless and intuitive user experience that is similar to free tagging.

I think the Contextual Administration module might also be useful too; there's some video documentation under the title of &quot;Automatic Node Reference on Node Create&quot; which will probably interest you the most.
UPDATE
You also might want to check out the NodeConnect module, it doesn't append the fields of the referenced node to the original node's edit form but does this instead:

Node Connect expands the node reference (of the references project) auto-complete field by adding a add new content and edit current content button.
The add a new button will all a new node to be added via a node add form and then return the user to the original form.
The edit button will take the user to the edit form of the referenced node, and return them when they are done editing.
Unlike other module that have provide this functionality this module does not use popups of kind, but caches the original forms when switch to child forms. This allows for multiple levels of adding and editing