Baby Sign Language - Great Question!
What a great question!!! And how wonderful that your baby signs so well!
I have just recently begun teaching my baby to sign and actually had the same question myself.
I agree with the concern about discouraging signing... I wonder, then, if using another sign in response would be a part of the solution.
I think also that children, being creative and really smart, would take (wrongful) advantage of us giving in to them just because they are signing.
Though giving-in may encourage them to sign, I think it would be for the wrong reason, to disobey us! And I, at least, don't want that!
I think when the time comes, I will sign "NO" and whatever other sign response is appropriate, and then if my son disobeys, or persists, then, well, too bad for him! NO is NO :-)
Thanks for your question. It was a great encouragement.