Thanks a lot for the replies.
I know that this is a bad idea, but some people above me disagree.....anyways if this doesn't work then they'll learn I guess.
I am pretty sure now that its a Locking issue. I think the Trigger acquires a Lock on the table which is not released and the SSIS package keeps on waiting for escalation of the Lock in order to start working.
I executed "sp_who2" while the trigger is working and it shows that the session of the Insert Statement keeps Running......but the session of the SSIS Package gets "SUSPENDED".
If it works fine when the trigger calls a job that calls the package, then I would bet it is an issue with the account being used to run the package. Is the package using trusted connections? Try logging into the server using the service account running SQL Server and running the package that way to see if it completes, or changing the trigger to change your security context before running the SSIS package.
I'm don't think its an issue with the account because if I execute the package using DTEXEC outside the Trigger using the same account then it executes fine.
Thus, it leaves me with the Locking scenario. Is there a way I can handle this scenario??....May be by using some Query Hints or some other way.