This works for me under slackware 10
In my xorg config, I have for both devices:
(Mouse1 is my touchpad)
Section "InputDevice"
Identifier "Mouse1"
Driver "mouse"
Option "Device" "/dev/psaux"
Option "Protocol" "PS/2"
Option "Emulate3Buttons"
EndSection
Section "InputDevice"
Identifier "usbmouse"
Driver "mouse"
Option "Device" "/dev/input/mice"
Option "Protocol" "ExplorerPS/2"
Option "ZAxis Mapping" "4 5"
EndSection
Then, under ServerLayout:
Section "ServerLayout"
Identifier "Simple Layout"
Screen "Screen 1"
InputDevice "Mouse1" "CorePointer"
InputDevice "Keyboard1" "CoreKeyboard"
InputDevice "usbmouse" "SendCoreEvents"
EndSection