4. I powered the circuit with out the mosfet first, to see whether anything blows etc. Powered up nothing blew. I did measure the voltage at VCC pin. It didn't stabilise never went above 8V. Should it have stabilised without the Mosfet?
That's normal. There is a resistor which charges up the capacitor on the VCC from the high voltage rectified DC, but this resistor is a large value and does not provide enough current to run the IC. Normally, when the power supply starts up, there is an auxiliary winding which is rectified and provides the VCC for continued operation, and the resistor only charge the capacitor for the initial startup.
If you want to check the operation of the IC without the MOSFET in place, do not apply AC power, but instead apply the necessary voltage (refer to datasheet) to the VCC pin from a bench power supply. That should allow you to check for proper gate drive using an oscilloscope. You can do this with the MOSFET in place too, since without AC input there won't be any high voltage DC to let the smoke out.
I measured the resistance of the transformer windings which connects to the mosfet, read almost 0 ohms. I know it'll be a low value but does 0 ohms sound right?
So finally can I conclude that the transformers winding has shorted out and if that is the case why didn't the mosfet and everything shorted out before.
The low reading is normal. Since the switching frequency is very high, there is only a very small number of turns in both the primary and secondary, so it will be less than 1 ohm for sure. Many DMMs are not very good for sub-1ohm measurements and will just read 0. It would be quite unusual for a transformer in a SMPS to develop shorts between turns of a winding, since there are few turns and they do not usually overlap. I have never personally seen a transformer fail with a short of any kind in a reasonably well designed SMPS, which Astec would be. Open-circuits are more common, especially in high vibration environments the winding wire can break at the pin.