Microsoft filed a patent for Kinect called "Gesture Keyboarding," that'll be able to read ASL and translate it into keystrokes without the need for a keyboard. This confirms that Kinect will be able to detect small movements of your fingers, turning sign language into individual letters, words or even phrases.
"Systems, methods and computer readable media are disclosed for gesture keyboarding. A user makes a gesture by either making a pose or moving in a pre-defined way that's captured by a depth camera. The depth information provided by depth camera is parsed to determine at least that part of the user that is making the gesture. When parsed, the character or action signified by this gesture is identified," reads the abstract.
More Info: Gesture Keyboarding Patent