As mentioned by Jeremy, removing the -t argument will fix this behavior. To 
work around this issue I have unchecked the "Disable while typing" checkbox and 
have added the following command to ~/.xprofile:
syndaemon -i 0.5 -K -R -d

I would love to see this fixed as this seems like a very easy fix.

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https://bugs.launchpad.net/bugs/1351772

Title:
  "disable touchpad while typing" doesn't work

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