Upgrade to Kubuntu Interpid Ibex 8.10 helped. The upgrade process
removed both touchpad and touchpad sections from the xorg.conf file. I
had to restore the touchscreen sections to get the touch screen
calibrated and use the evtouch driver (would like to see how to do this
via hal) but now both touchpad and touchscreen work simultaneously.

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Evtouch makes touchpad unusable
https://bugs.launchpad.net/bugs/286824
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