Ok I solved the problem. Here is how:
T8 (pin 8 ) is not the clock. it probably is some button.
After getting the 1111 outputs I thought of enable/disable button. I have seen them on a few touchpads. You click it when you want to disable the touchpad.
So instead of thinking in terms of the Test points T5, T6, T8, T10, T11...etc I had to think in therms of the connector itself.
But first I noticed something strange. T6 (pin 5) goes to the chip, but there is a 104 resistor to ground. 104 is the code for 100k Ohm.
So after making a table of the pins and trying a few combinations the solution is :
1 - not connected
2 - Ground
3 - Data (T11)
4 - Clock (T10)
5 - ! must be +5v (T6)
6 - +5v
7 - Ground
8 - T8 (don't care)
9 - T9 (don't care)
10 -Ground
11 - ! must be T5 Ground
12 - Ground
13 - not connected
In summary pin 5 must be 5v and pin 11 must be Grounded on this model.
Notes for anyone trying to connect a touchpad to ps2 cable :
The test point names seem to be the same.
T10 = clock,
T 11 =data,
T22 = +5 volt (not T20, because it hast to pass trough the 470 resistor),
Ground T28 or the big copper exposed parts.
That should help you get started. Also check if T5 and T6 are connected to the connector, if so T6 should get +5v and T5 should be grounded.
Also insertig the
Serial.println("inside mouse_init"); and Serial.println("exit mouse_init"); helps with debugging. The touchpad gets reset twise on start. I have also noticed that it takes quite a few seconds to start, maybe 10 or so. So be patient if you see it get into mouse_init twise.