I have encountered the same problem. And, it's definitely not a bug with either 
GNOME, KDE, or X, since the problem occurred with GPM as well. Also, I have 
found that the touchpad can work with 2.6.27, but won't work with kernel 
2.6.28-11, as Daniel have described above.
#uname -a
Linux acer 2.6.28-11-generic #42-Ubuntu SMP Fri Apr 17 01:57:59 UTC 2009 i686 
GNU/Linux

With kernel 2.6.28-11, only the mouse left key and right key will work.
And once you touch the touchpad or click the mouse left or right key,
the keyboard will stop working. Any keys you typed with the keyboard
will not come out, until you click once more the mouse keys on the
touchpad.

My temporary solution is to disable the touchpad, so that keyboard will
not be frozen. Or, boot with the kernel 2.6.27.

-- 
acer touchpad not working after upgrade to latest kernel (2.6.28-11)
https://bugs.launchpad.net/bugs/365382
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