You've created a VSM that is not following the VSE pattern of receiving a request, running it through a service image, sending one or more responses, then looping back to receive another request. Of course it's not going to look correct in the VSE inspection view.
> 1. In inspection view , only 3 items are visible i.e. unknown, step1 , step2 .
The inspection view is taking a "sampling" of events that happen during the VSM execution. It's not always able to show every event and discern every step; that's just the way it works. It's designed for showing errors. If you want to trace every step and every event then the ITR is what does that.
> 2. In inspection view, no incoming request found message is seen for every request
As described, your VSM does not have a request.
> 3.Step 3 is executed , but unable to find it's traces in Inspection view, but file is created on Desktop
That sounds to me like things are working.
> 4. Filters of step1 and step2 are unable to create a file at location - c:\users\foldername
Are they creating files in the same location as step3? Are they able to create files there when run i the ITR? What is the actual error they're experiencing?
> 5. In VSE log, only step1 and step responses or traces are present.
Again, the VSE log is looking for "standard" VSMs with the right pattern for pulling out request/response info. I believe that log is mostly based on the presence of a service image step.