While Touchpad and USB Mouse worked out of the box on my T61 running Ubuntu 8.04, I prefer the synaptics touchpad driver.  Installing it was a breeze, but it stopped my USB Mouse from working.

While there are a lot of fixes are on the internet, it took me a while to get it to work, mainly because my Kernel was too new.  Most fixes suggest to use the "AlwaysCore" Option in the "ServerLayout" section.  Eventually I found this link which suggests to use "SendCoreEvents" instead.  Now my xorg.conf looks like this:

Section "ServerLayout"
    ...
    InputDevice    "Touchpad0" "CorePointer"
    InputDevice    "Mouse0" "SendCoreEvents"
EndSection
...
Section "InputDevice"
    ...
    Option         "SendCoreEvents" "true"
EndSection
...
Section "InputDevice"
    Identifier      "Touchpad0"
    Driver          "synaptics"
    Option          "CorePointer"
    Option          "SendCoreEvents" "true"
    ...
EndSection