The mention of American Sign Language (ASL) support in Microsoft's Kinect patent raised hopes that the motion-gaming add on might be useful for more than just interacting with virtual children or swordfighting without swords; unfortunately, Microsoft has confirmed Kinect won't actually ship with ASL functionality. According to information given to Kotaku, that's because Microsoft downgraded Kinect's video hardware capabilities.
"We are excited about the potential of Kinect and its potential to impact gaming and entertainment. Microsoft files lots of patent applications to protect our intellectual property, not all of which are brought to market right away. Kinect that is shipping this holiday will not support sign language." Microsoft statement
While Kinect will ship with webcams capable of 320 x 240, Microsoft apparently planned the cameras to support over twice that resolution. That would have allowed the system to recognize not just limbs but individual fingers, hence the ASL support.
Unfortunately, in trying to cut costs, hit a $150 street price and still maintain a decent profit margin, Microsoft supposedly opted to use cheaper, less capable cameras, which can only recognize limbs. They also offloaded some of Kinect's processing from the camera-bar itself to the Xbox 360 console itself. Microsoft hasn't confirmed this is all true, but if so it suggests the first-gen hardware will never be able to support ASL.