I think part of the reason for the insane PC mouse industry is the relatively low cost of the periphreals and the (perceived) direct impact it has on the skill of the player playing a game. Where the PC gamer will drool over the 500$ amazing graphics card he can't afford, he can placate himself with a 70$ crazy ten-thousand button mouse.

Why there isn't any innovation in laptop input devices I'm without a clue. It seems like there are so many better ways to input data than a touchpad and two buttons.

Because it's a poor risk to take - you have this whole product you've designed, and if you built in an unproven pointing device and it flops, the whole product is a dud. At least with desktops a mouse or trackpad is cheap to replace, so a user might be willing to buy a computer with an unconventional input device knowing that it's only $50 to replace. Buy a laptop and find out you hate the pointing input, you're out 2 grand.