I would really like to convert files with transliterated Sanskrit to Kindle, and so far it wasn't possible, but now I see a bright future, at least for Kindle 3.
Amazon should also fix it for Kindle 2, at least the one they call "International"... It can't be that hard.
UPDATE:
I just found out it actually works already both on Kindle 2 and 3!!!

The problem was simply that Calibre apparently is not converting my RTF file to MOBI properly. When I use Mobibook Creator instead, and throw in a file I made in wordpad, the Kindle shows ā, ṛ, ś, ṇ etc. properly.
Kindle 2 even supports more Latin unicode characters than Windows XP's fonts. But unfortunately no Devanagari अणऊ, neither on Kindle 2 nor 3.