This has been reported in bug report #1898. Didn't see a work around posted...
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By chance I have been filing that bug.
Workaround is a bit tricky as you will have to disable the zaurusd from looking at the right input event source.
Open a console (which must be done by keyboard or via network if the touchscreen does not work).
Go to /etc/zaurusd and look for the mach-config-vars file.
Change the TSKEYS_CONF entry to /dev/input/event0 or whatever but not to event1
Save and reboot.
This will prevent TSKEYS to lock the input event device which will cause the soft buttons on the right of the screen to stop working properly but at least the touch screen will be functional again.
Alternatively, build your own tslib package with OpenEmbedded by removing the input patch from the bb file.
Oliver