That's the point of my suggestion, you should be able to signal with your hand, that way it is car and track position independant feature. Besides, signals on a car are used to signal the direction the driver intends to take a vehicle and can be mis-leading and cause further confusion.
By track position independant I mean where a driver may occupy the racing line or not, an approaching driver can presume that, if a car is off the line nearing a corner and has been given the signal to pass, then the car signaling the pass will not attempt to get in teh racing line until the pass has been completed. Etc etc etc.
Depending on how a feature like this may be implemented the LFS racing rules could accomidate it (the process behind the procedure), if per say the pass feature is directioncal (left hand for left side pass vs right hand for right side) then one would signal the direction they expect you to go, assuming the signal a direction. heh
A simulation of an imperfect system should be just that.
I think a nice feature to add that would help with passing is the ability to signal someone to pass you. So the driver may raise their hand or wave their hand as a signal to pass.