A few people who have installed Apple's "Magic Trackpad" update are experiencing problems with the new behaviors. The main issue seems to be that scrolling is jittery instead of smooth, but others have had problems with mouse movement also not working well.
If you experience these problems, the first step is to test the trackpad behavior in another user account, since there may be a faulty settings file in the primary account that is interfering with the software. If everything works properly, then you will need to locate the trackpad's settings file and remove it.
An easy way to do this is to do a Finder search on the hard drive for items with a period in their filename (search for a single "."). Then include system files in the search, and list the found items by date modified. Then change some trackpad settings and see which files move to the top of the sorted list. Some judgment will have to be made, but if they appear to be trackpad-related, then remove them and then log out and log back in.
If the problem does persist in secondary user accounts, then try troubleshooting third-party input utilities. There are numerous trackpad enhancers that people use, including "jitouch", "a better touch tool", and full driver alternatives such as USB Overdrive. Uninstall these items, and then try reinstalling the Magic Trackpad update.
You can also perform general maintenance routines on the system to clear out boot caches, user caches, and other temporary files that could be contributing to the problem.
If you do not have any third-party utilities installed, you can try refreshing system components by reinstalling the latest Combo updater for your version of OS X. Download the updater from Apple's support site and run it when booted into Safe Mode. Then also download and reinstall the Magic Trackpad updater. Optionally, instead of using the Combo updater you can reinstall OS X, which should perform an "Archive and Install" of the operating system and replace all system components instead of those just updated since the initial OS release.
Unfortunately the trackpad update does a lot more than just update or install a kernel extension or two. The installer instead replaces many Bluetooth components such as applications and utilities, extensions, frameworks, preference panes, and plug-ins, along with the underlying Bluetooth system daemons. This makes uninstalling the driver a bit hard to do, but you can do a workaround by reverting from a previous full system backup.
Hopefully you created a backup using the Time Machine or Cloning utility before installing the trackpad update. For Time Machine, follow the instructions in this knowledgebase document, making sure to select the most recent backup that was done before you installed the new software.