I went to Sony Chat eSupport.
Free for the 1st 15 minutes.
Imagine that, it took them exactly 15mins to diagnose the prob,
but I would need to give them $89 to fix the prob.
Finally I ended up on the Sony supportForum.
And they actually helped me with the following Reply.
In order to restore your Touchpad options for Scroll and Tap, you must reinstall
the Shared Library , Sony eSupport - VGN-FW250J - Drivers & Software
the VAIO Event Service , Sony eSupport - VGN-FW250J - Drivers & Software
and the Notebook Control Utility , Sony eSupport - VGN-FW250J - Drivers & Software
these 3 drivers should restore the touchpad utility over the default windows USB mouse driver currently running.
if you still are encountering problems with windows 7 please review this guide:
Upgrade Instructions for Windows 7 , Sony eSupport - Electronics - Support Information
Hope this helps someone else too.