Transaction signing by SMS is possible, if the receiving end pushes the transaction onto the bitcoin network.
An sms is up to 160 characters in length, a transaction signing message is shorter than that. The format of a transaction with one input and one is described on the
https://en.bitcoin.it/wiki/Transaction. You can encode bitcoin transactions in many forms as long as the receiving end pushes them onto the bitcoin network, this is by no means limited by broadcast method or encoding. That said, typing the transaction into the phone is not a very user friendly process, you probably want an app to do that for you.