How to disable trackpad clicks while typing
Agreed the setting on by default does not actually disable the trackpad. It just tries to be "smart" about it, ignore accidental touches.

The only way that I have found is enabling "Mouse Keys" in System Preferences > Accessibility > Mouse and Trackpad. Check the "Enable Mouse Keys" checkbox. When it is enabled, you can disable/enable the trackpad by pressing the option key 5 times.

It is not really a full solution, but between that and the "Disable trackpad when external mouse or trackpad is present" option it is as close as it gets. 

You can also increase the resistance of the click of trackpad in the Trackpad settings in System Preferences which may help.