Reading your problem with the update, if it is still not resolved then you should contact Microsoft by either phoning your local office/call center or reporting the problem over their website. One option to try your self is removing the update that caused that to happen, and if it is resolved and your touch screen works then re-install the updates but select the updates, don't install everything, this way you will reach a point where the update disables your touch screen, then remove it and in future updates don't select identical updates or updates of the same update.
Sometimes Microsoft releases software and hardware updates that matches your system and then they also release additional updates that then conflict with the important and required updates installed.
Also search your manufactures website and the model name, they should have solutions around this, you won't be the only owner of your laptop model with the same problem, there'll be many. Just try to solve the problem by using a program pre-installed on your laptop to search for any errors, but don't use internet software for that, if you have Vista then you should already have the software to do that.
But I'm not really sure what could be the problem other than conflicting software, as I said just contact Microsoft and report the problems and failures to them. They will ask for a couple of details and the updates installed and system information and they should immediately fix the problem through an update or they may just guide you through to fixing it