Alright, use the smaller partition (hopefully it has 40 GB or more as a OS partition) to install the OS. If it's Window XP then it'll do, window 7 usually heavier in terms of load on your model most likely. Once you have completed your installation of the OS, there's numerous way to debug the problem. It's probably best to test each one out to see where the true problem lies.
This link talks how the laptop battery may be the cause:
http://www.fixya.com/support/t1085712-problem_acer_aspire_5050_touchpad_not
In short:
1) Followed the acer website link and downloaded the appropriate keypad drivers by looking for Aspire 5050 (5050 is the model)
(Try the main site and see if they have your model drivers. If not, you can try this one:
http://driverscollection.com/?H=Aspire 5050&By=ACER)
2) Put it on a pin drive.
2.5) Unplugged the acer 5050 battery and still allowed the power cord to be plugged in (in effort to save time)
3) booted the acer 5050 laptop and kept hitting F8 to go into safe mode
4) logged into safe mode as 'Admin' and ran the setup from the drivers after inserting the pin drive.
5) shutdown windows
6) plugged the battery back in, turned the power on, everything works fine.
Second reason could be particular updates are interfering your laptop operations. But for now, let's try the drivers and battery approach to solve the problem.
Here's another site with a collection of drivers.
http://www.nodevice.com/driver/Aspire_5050/get71493.html
Please scan it for viruses and check it for malware before installing anything.