I've found the best way to get rid of hard, compact clay is to use gypsum. You can buy a few bags of granulated gypsum at a hardware or landscaping store and spread it with a rotary spreader. Do it several times...maybe once a month and water it in well. Within about a year the soil will be much better. This especially helps with drainage issues.
@Joker,
I have had good luck with insecticide Acephate(Orthene), but be careful on which trees you apply it. Just apply to those trees until they are just starting to drip, and reapply after a couple weeks if needed. That should take care of those worms, although a combo of treatment and hand picking is better than either alone!
Acephate has a terrible odor and should be masked with a fragrance product. Most smell like spearmint or citrus. You can get these products combined with a surfactant to aid in sticking, drying, and longevity. Always read labels and be sure the plant species being treated is tolerant to the products being used.