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I am in the process of finishing A Thousand Sons Black Library audiobook (awesome book BTW).

I am still unclear of how the Thousand Sons got cursed with the flesh eater curse. I understand that their gene seed had a high tendency for psychic powers, but
does anyone know what originally caused this curse? Was it the result of some type of deal Magus made with the Chaos Gods?

The Thousand Sons gene-seed was highly prone to mutation in general, not just psychic powers. I believe the flesh eater curse occurred because the Thousand Sons had a gene-seed highly prone to mutation and they were in the warp, the source of the vast majority of mutations.

"Flesh Change" is the term for it. "Flesheater" is one of the viruses used by the Imperium to exterminate worlds.

The hinting at it is what CrashCanuck says though. It's "highly prone to mutation in general" and the psychic powers are a result of that.

Supposedly the geneseed for the 1k Sons was created (I've also seen the word 'harvested' used) during an increase in warp storm activity near Terra, so that's probably not helping anything either.