Check it out ... http://www.engadget.com/2009/06/03/project-natal-video-hands-on-impressions-and-further-details/
"The body tracking is truly impressive -- according to Kudo, it's picking up 48 joint points on the human body. As soon as we stepped into line in front of the box, the avatar immediately took on our stance and movements. And we mean really took them on -- little gestures with our arms, the posture we had, front and back movements -- it completely tracked them with accuracy. We did notice a bit of stutter during some finer movements, but overall the effect was impressive (and more than a little eerie)."
"The accuracy is far better than you would imagine it could be; it's very impressive stuff."
I think we should take the wait and see approach before making any assumptions about the accuracy of the skeletal tracking. I have no doubts that finger tracking is out of the question though. I'm also interested in knowing if it could pick up hand rotations like Shifty suggested.
The dodgeball demo thing did seem to have those. Maybe it was just using IK to guess the position of the hand based on the position of the arm? Or, again, we may not have seen what we thought we saw, it wouldn't be the first time at E3.