That's really weird, because I tend to have dry skin and yet no major issues with my hands despite knitting for hours daily. I've had some days where I knit for 8 or more hours and my skin was fine! I do put on some hand cream before going to bed though. I wonder if it depends on the yarn and needles you use? I use metal needles for almost all my projects since the stitches slide easier - I bet bamboo could be more irritating.
My problem is more about pain IN my fingers and palms - the same type of soreness I get from the gym.
I thought it would go away once my hands got used to the strain from knitting, but no!
Maybe I'll have really muscular veiny fingers one day.