“Disable Touchpad while typing option” gone in Ubuntu 16.04 LTS

In short, edit your quirks file:

sudo vim /usr/share/X11/xorg.conf.d/51-synaptics-quirks.conf

And add the following to the end of the file:

# Disable generic Synaptics device, as we're using
# "DLL0704:01 06CB:76AE Touchpad"
# Having multiple touchpad devices running confuses syndaemon
Section "InputClass"
        Identifier "SynPS/2 Synaptics TouchPad"
        MatchProduct "SynPS/2 Synaptics TouchPad"
        MatchIsTouchpad "on"
        MatchOS "Linux"
        MatchDevicePath "/dev/input/event*"
        Option "Ignore" "on"
EndSection

Now restart Xorg:

sudo systemctl restart lightdm

Now, just start syndaemon as usual:

killall syndaemon
syndaemon -i 0.50 -m 0.10 -d -K

Note: For some reason, two-finger scrolling didn't work until I fully rebooted my laptop, but it eventually started working.