Exact Same Issues for me and FINALLY this week I got it solved. But you won't believe what it turned out to be. Embarassingly simple, but in the end the simplest solution is the best solution.
I had a wireless bluetooth magic mouse in the bottom of my computer bag (i carry as a spare) that was turned on and broadcasting a signal that was overriding the touchpad and other mouse that I had at my desk.
I had read these posts and found a bunch of things to try. At the advice of some of these discussion forum posts I went to the apple store to have them replace the trackpad, then problem was fixed.
At the apple store, we
a - updated the PRAM
b - inspected the battery to see if it was touching the trackpad from underneath. ruled out as ok
c - adjusted the tension screw that controls the sensitivity of the trackpad. did not fix the problem
d - booted the computer from various known good software configurations using the network boot options and diagnostic tools at the apple store. Because the mouse click would not work immediately on boot from any configuration, we determined it was likely a hardware problem and decided to replace the touchpad
e - actually replaced the touchpad, which on my MBP 17" mid 2010 was approx 90 minute service, so i had to leave it overnight for service
When I went to pick up my computer with the new trackpad, the mouse click did not work even though it had been working just fine for the technician moments earlier. The tech told me to please wait a minute and took my computer back to the workbench. As he was walking away the message flashed on the screen "Connection Lost" to my magic mouse. At that point, clicking worked. He came back out and asked if I had a wireless mouse in my computer bag. Once I located it and removed it from the bag which was pressing against the touch surface of the mouse, both the trackpad and mouse started to work.
It was a frustrating few days, and embarassingly simple to fix. In the end, mine was neither a hardware nor a software problem. I hope that this post now saves someone else the same pain.