Apologies for the delayed reply. I looked and found that I had it in both files (hanging head in shame), because I am an idiot. I have commented it out now as the version of libinput on my system no longer needs it. According to Matt H in this thread [RESPONDED] Fedora KDE - "Disable while typing" for touchpad doesn't work - #18 by Matt_Hartley it should go in the local-overrides file. The other file you mention with the touchpad entries is mentioned by Mario in the second.
I didn’t know how to see what was active, but this page had helpful instructions: Device quirks — libinput 1.26.1 documentation, and I could see when I uncommented the entries in the local-overrides file that they were noted. Then when I removed that file and uncommented the entries in the 50-system… file they were noted as well.
So that leads me to believe that if you have the file in place you should be able to see a result when checking. I found three entries in /dev/input/by-id and saw the quirk “active” for each of them. Edit to add: sudo libinput list-devices will do better than my directory spelunking. It also showed me that the touchpad is disabled when typing.
Hopefully this is a little bit useful and helps you to track down what is going on. Thanks for the question, I learned something new (but I’m still an idiot)!