To create gesture that matches letters:
You can use the GestureBuilder Sample Project from the SDK.
Do New Project > Android Sample Project > GestureBuilder ...
Make sure you installed the available samples from the SDK Manager.
To recognize gestures:
Take a look at this tutorial.
About libraries:
There is some libraries about gesture reconginition out there.
But I don't think there is any library that will convert coordinates directly to a letter.
There is already a build-in gesture recongnotion system in android.
Why not use it ? http://developer.android.com/resources/articles/gestures.html
I hope all this will help you. :)
EDIT:
You can also take a look at this question.
OCR means Optical character recognition.
This is not exactly what you are looking for, but i thougth you could try to convert gestures to images and then process them with tesseract.