But don't field lines only terminate on conductive surfaces? This article mentions that the change in capacitance read-out when a finger is brought close to the sensor is of the order of a pico-farad. Considering how nonconductive the epidermis is (~100KOhms, worst case), this change is quite large. Wouldn't it be orders of magnitude lesser if epidermis was really acting as a sink? Could it be possible that the field lines actually terminate on conductive layers underneath the epidermis?
It's a capacitive touchscreen (not resistive) and it uses AC pulses to detect the capacitance of the human body. The thin layer of outer skin on the body may indeed be quite non-conductive but the glass which the field projects thru is hundreds (or thousands) of times more non-conductive so clearly the skin's low conductivity isn't of vital importantance in this scenario.
I'm not sure where did you get the 100kOhm epidermis resistance, but I guess this number is valid only for low-voltage DC. Touchscreens work with AC as the article you cited confirms. AC is carried though capacitors, so it largely ignores the epidermis when it travels through the body (think of epidermis as of yet another capacitor shunted by a 100kOhm resistor). The internal body resistance is considered to be much smaller, around 1.5kOhm or so.
Could it be possible that the field lines actually terminate on conductive layers underneath the epidermis?
In other words you're asking if the rest of finger (beyond the epidermis), and more, the rest of the body has an impact on the capacitance change of the touch screen, right? If so, the answer is yes. You could experiment it your self, although it may hurts a bit. Cut a very thin slice of your finger extremity and put it on a touch screen. You would see, it won't work ;-)