There is a line in your menu.lst:

kernel /boot/vmlinuz-2.6.20-15-generic root=UUID=aee7eebe-02ba-428a-
b90b-afa9aed6dbcd ro quiet splash

Change it to:

kernel /boot/vmlinuz-2.6.20-15-generic root=UUID=aee7eebe-02ba-428a-
b90b-afa9aed6dbcd ro quiet splash i8042,imax=1

That did it for me.

I see you have a line 
defoptions=i8042.nomux=1
which from my limited knowledge doesn't do any good, so might as well remove it.
A line exactly like this, character for character including the #, 
# defoptions=quiet splash i8042,nomux=1
is only used by the program update-grub as follows entered as a command line in 
terminal:
sudo update-grub
So if you do not do
sudo update-grub
adding i8042,nomux=1 to the defoptions line it is of no use.  The: # 
defoptions... is only used by the update-grub program which is only run when 
you issue it or else a new install is done.

Now changing your kernel line as in the beginning of this post should do
it as it is without having to issue: sudo update-grub.

Do note that some updates or an install of course replace the kernel and
change menu.lst, so if a kernel update should be done, you'd need to
update menu.lst on the new kernel line.....

Cheers, Jerry

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feisty trackpoint false clicks & movement
https://bugs.launchpad.net/bugs/84119
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