Decent handwriting recognition would help here - not as a full substitute, but as a lightweight alternative.

Though I cannot imagine it working within the confines of the keyboard HID API.

With non-defective keyboards (and non-spazzy hands), the key presses on a keyboard are non-probabilistic; that's not the case with handwriting, where a large amount of the information regarding how to interpret text comes from the surrounding characters - including those that follow.

You'd need to deal with the shifting probabilities of text input, and without introducing user noticable latency or triggering an excess of events.

It doesn't sound impossible, but it wouldn't be easy either.