Created attachment 30583 [details]
patch against kinput.c to workaround the pointer release issue in Xfbdev

Pointer works fine until the pressure is released. At this point the pointer moves to some apparently random location near the bottom left part of the LCD screen.

Using xorg-server-1.5.3 configured with:
--disable-config-hal --disable-xnest --disable-xephyr --disable-xvfb  --disable-xorg --enable-kdrive --enable-xfbdev --disable-glx --disable-dri --disable-null-root-cursor --disable-builtin-fonts --disable-aiglx --enable-tslib

Xserver is started with:
/usr/bin/Xfbdev inet6 -kb -screen 480x272 -mouse tslib,,device=/dev/event1

The touchscreen is supported by in-kernel driver AD7846. ts_test and ts_calibrate utilities work without problem.

According to my analysis, the problem stems from the fact that GetPointerEvents is called with flags=0 instead of flags=POINTER_ABSOLUTE in case of ButtonRelease event, so pointer coordinates are interpreted as relative to last position and effectively doubled. 
flags is initialized inside KdEnqueuePointerEvent in the code that processes the MotionNotify event. The ButtonPress event is always associated with a MotionNotify event and both are processed in the same call to KdEnqueuePointerEvent so flags is set properly. The ButtonRelease instead is processed on its own, the MotionNotify code is not called and the flags is not initialized. At least, this is my observation on my hardware.

I have patched kinput.c to workaround the problem, but I do not understand really the root cause. Patch is attached.

Possibly related issue:
http://lists.freedesktop.org/archives/xorg/2008-September/038873.html