So after a lot of tedius work... i managed to copy all my data. Just in case anyone is in the same situation, I wanted to explain what I did so that you can solve it easily without all the panic that i went through.
After going through several online communities, many of which suggested using automator, it seemed too complicated and there was no clear step by step procedure to follow. One or two of the discussions had someone suggest that in order to copy the case-sensitve files to a noncase-sensitive drive, you should move the files to trash and then manually move them to the computer.
As crazy as that sounds (and so many users told them it was a bad idea) it actually worked!!! its time-consuming and tedius and everytime you move to trash it will ask you for password, its annoying but be patient, atleast you can access your data... and its the easiest way to do it..
here's a step by step procedure for what i did:
1. Plug in Time machine drive
2. Go into the folders till you see that "inprogress" file
3. Right click for 'show package content". Whatever time machine managed to back up before it failed should be there. Thankfully for my it was almost everything... if i can't tell what's missing its probably a good thing.
4. Follow the folders into the Users folder and here all your personal data should be there in Desktop, documents, downloads, pics, music etc.
5. now I did this one folder at a time simply because i didn't want very long transfer times. Please test this with a not so important file to make sure it works for you.
6. Pick a folder and move it to trash. You will be prompted for your password, enter it. It will now be in your computer's trash. Go into trash and drag the folder to your desktop... or whichever location you want to copy it to. Once's its done, open it and make sure everything is as you want.
IMPORTANT: Please make sure your data has copied correctly before you empty trash because once you do, its gone from the time machine as well. So make sure before you trash it.
7. To keep the process easy, empty your trash. This way you'll make sure you don't eat up your space by copying something multiple times.
8. Repeat the above steps till you've copied all your data. Yay!
Now for some reason, by doing all this, all my user permissions were strange so everytime I wanted to delete or move a file, it would prompt for a password. It gets pretty annoying but there's a simple fix.
1. Click on finder and go to your "Users" folder. Right click and Get info.
2. In sharings and permissions at the bottom, make sure all the users are set to "Read & Write".
3. Click on the lock below and Enter password.
4. Click on the gear / settings tab and select "apply to all enclosed items".
This should fix the password prompt problem. Just to test find any random file and try to move it. Over time if the problem occurs again, just make sure you check the permissions in get info.
So far its pretty simple. Move files/folders to trash >> Drag it to chosen location on computer >> Empty trash once copying is done and finally change all permissions to Read & Write.
Now all my photos were loaded in iPhoto so I had to copy it separately.
1. Go back into the users folder in the time machine drive.
2. go to pictures and locate iPhoto
3. Right click on iPhoto and select 'show package content'. All your picture files should be there.
4. Make sure you copy the 'originals', 'modified' and 'data' folders.
I still have to upgrade to Mountain lion to check if this would restore my iphoto as it was because i can't get the latest version of iphoto on lion. So if it works for you, please let me know. If not, well atleast all the photos are on the folder.
I have only copied all the data from my users folder and not anything from applications or library... i'll try and figure over the next couple of days if i need to do that.
Hope this helps!