After much painful debugging, I managed to resolve the issues related to Site Template save and restore for SharePoint 2010 based Sites. I noted that the SharePoint 2010 site itself had corrupted lists "Calendar", “Issue” etc (which does not get migrated properly from MOSS), which I had to delete and then created a new lists (such as “IssuesRegister”) in SharePoint 2010 and painfully relinked all workflows, data views, dispforms etc. I also deleted all the master pages (starting with clarity_) and styles library as they were remains from MOSS/SharePoint Online instance and was causing incompatibility issues. Anyways after all this, I saved the site as Site Template and EUREKA IT WORKED!!
Once I got the Site Template, I restored the site on new server and got a series of missing features exceptions (with correlation IDs - for example "The site template requires that the Feature {e34b0b8e-6e21-49ad-8d2f-530a29d61175} be installed on the farm or site collection"). I painfully debugged through each missing feature ID and learned the following (in a very painful way again)
1) Ensure that all Site Collection and site Features in Source and Destination SharePoint servers are identical.
2) I used the Powershell script Get-SPFeature -Site <Site Collection name> | Sort Id | FT DisplayName,Id to get all features deployed and matched against the list of feature names from here against the corresponding missing feature complained by SharePoint 2010 on the new box. Once I identified the feature missing, I went ahead and enabled the feature (see point 2 below)
3) The Following features are required for restoring all SharePoint 2010 Site Templates that were migrated from MOSS (For e.g. - http://shp2010test is the new server where I tried restoring the new site based on SharePoint 2010 Template) – USING POWERSHELL:
a. Enable-SPFeature LocalSiteDirectorySettingsLink -Url http://shp2010test
b. Enable-SPFeature InPlaceRecords -Url http://shp2010test
c. Enable-SPFeature SignaturesWorkflow -Url http://shp2010test
d. Enable-SPFeature HelpLibrary -Url http://shp2010test
e. Enable-SPFeature LocationBasedPolicy -Url http://shp2010test
f. Enable-SPFeature OpenInClient -Url http://shp2010test
g. Enable-SPFeature MobileExcelWebAccess -Url http://shp2010test
h. Enable-SPFeature TaxonomyFieldAdded -Url http://shp2010test
4) Strangely there was no theme applied to new site and so I had to reset the theme on this new site to inherit from parent and EUREKA! The site was live and all workflows seems to be working ok!