I should say my search for Indian source is not because I think India is the only source of authenticity in the world, I'm just interested in history. The later Chinese interpretations of the same metaphor are also very interesting.
Here are uses of the metaphor I have found, listed by date of translation/composition in Chinese:
406《大智度論》Mahā Prajñāpāramitā śāstra
443《宋译楞伽》Laṅkāvatāra sūtra (Liu Song dynasty translation)
513《魏譯楞伽》Laṅkāvatāra sūtra (Later Wei dynasty translation)
first half 6th c.《往生論註》Tanluan's Commentary on the Pure Land Discourse
587/629《法華文句》Zhiyi's Commentary on the Text of the Lotus Sutra
Those are the pre-Tang examples. Zhiyi's disciple Guanding waited so long to write up his notes from Zhiyi's lecture that it was the Tang dynasty(starting 618) by the time he finished!
After the start of the Tang, use of the metaphor starts to multiply. Here are some examples.
693？《圓覺經》Yuanjue Jing (probably compiled/composed in China)
704《唐譯楞伽》Laṅkāvatāra sūtra (Tang dynasty translation)
705/13《楞嚴經》Śuraṅgama sūtra/Lengyan Jing (probably compiled/composed in China
And of course the moon-finger metaphor is often quoted in Chan/Zen records.
Does anyone know of its use in any other places? I saw on Wikipedia that there is a kind of Tibetan picture showing a Buddha pointing at the moon, http://en.wikipedia.org/wiki/Bhavacakra I wonder if there is a textual source for that.
So the only two Indian uses of this metaphor I have so far are its use in the Mahā Prajñāpāramitā śāstra (tr. 406) and in the Laṅkāvatāra sūtra (tr. 412?[lost], 443, etc.).
The usage in the Mahā Prajñāpāramitā śāstra is in the context of an explanation of the second of the 'Four Reliances' 四依四不依 from the Mahayana Mahaparinirvana Sutra 大般涅槃經. One should: 1, rely on the Dharma, not upon persons; 2, rely on the meaning, not on the language; 3, rely on wisdom, not on knowledge; 4, rely on sutras that reveal the whole truth, not on sutras that do not.
The passage from the Mahā Prajñāpāramitā śāstra goes:
"Rely on the meaning": in the meaning there is no competition between good and bad, offences and wholesome acts, truth and falsehood. Therefore, language is what is used to get the meaning, the meaning is not language.
It is like someone showing the moon to one confused by pointing at it, and the confused person looking at the finger and not at the moon. Someone says to him "I am pointing at the moon to let you know about it. Why are you looking at my finger and not at the moon?"
It is the same in this case: language is the finger pointing at the meaning, language is not the meaning. This is why you should not rely on language.
The second Indian source is the Laṅkāvatāra sūtra. Luckily there is an English translation of a Sanskrit version of the sutra (made with reference to the Chinese versions) by DT Suzuki available online.
In this sutra the "pointing at the moon" metaphor is actually only put together in a verse summary:
As the ignorant grasp the finger-tip and not the moon,
so those who cling to the letter know not my truth.
In the prose of which this is a summary, the moon and the pointing are two separate metaphors.
It basically boils down to this: Just as distortions in a reflection of the moon do not change the shape of the moon, the Buddha appears in the world by many names and in many aspects, but in ultimate reality is always one.
Many people do not understand this because they do not understand the relationship between language and meaning, just as a child might look at the finger instead of the thing pointed at.
The verse summary then combines these two metaphors in a very neat and logical way.
Suzuki's translated text is a little too long to paste here - the section I just summarised comprises the whole of chapter LXXVI in his translation http://lirs.ru/do/lanka_eng/lanka-nondiacritical.htm , beginning "Mention is made in the canonical books"
I'd recommend reading that chapter if you want to really explore the "pointing at the moon" metaphor.
Several of the other sutras and Chinese commentaries give the metaphor a different spin, maybe I'll look at some of those later.