Time has done few favors for Microsoft’s Kinect peripheral for the Xbox 360. When it debuted at the company’s E3 presentation last year, it seemed incredible. But as time continues to march on, it seems more and more chinks have appeared in the device’s controller-free armor.

Early on, it was boasted as a veritable miracle machine, able to detect body movements, recognize voices, and engage the entire family. All that for what was rumored to be a $50-$80 price point (which Wedbush-Morgan analyst Michael Pachter believed would be the case). The future was coming, whether we wanted it or not.

But the more we saw, the more flaws became apparent. It had trouble recognizing darker skin tones (a problem which appears to have been rectified), couldn’t follow a person’s movements while they were sitting, and could only track two individuals at a time. All for what was revealed at this year’s E3 as a $150 price point.

More recently, however, Kotaku reported that a patent for the machine indicated it was capable of not only reading American Sign Language, but converting it to spoken word or text. While it may be a feature not everyone would make use of, it would certainly help expand the range of the device’s accessibility.

Unfortunately, it was not to be… at least, not for the units which will be available at launch. Following up with Kotaku, Microsoft gave the following statement about the feature:

“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.”

An unfortunate turn for the device, which leaves the question of why the patent suggested that capability would be included.

Kotaku cites sources said to be close to the product’s development, who told them that, in truth, the hardware which ships later this year won’t be as capable as what Microsoft had originally intended:

The original Kinect had a much higher resolution (over twice that of the final model’s 320×240), and as such, was able to not only recognise the limbs of a player as the current model version can, but their fingers as well (which the current version can’t). And when the hardware could recognise fingers, it would have been able to read sign language.

To create such a device would be costly, and though earlier rumors suggested a $50-$80 price point, it is said that it was always Microsoft’s intent to sell it at $150. And even then, the higher price would not yield the company a greater profit on sales of the device itself.

So what to do? Microsoft “dumbed it down,” so that in case Kinect doesn’t catch fire (in the marketing sense), they wouldn’t lose as much money on their investment. Hence the lower resolution, the use of the Xbox 360′s own processing power to help lighten the load on Kinect’s, and of course, no sign language.

While Microsoft thinks that Kinect is a “great value” for the price, it seems that consumer interest feels otherwise. One is now left to wonder if this latest development might lower it any further.