Well finally I have found the solution to the problem and now posting a detailed account of the the solution.
I did the same as others did, tweaking and tinkering with the touch pad ribbon but this is only a half solution to the problem and is very frustrating not to be able to close the lid. I think many more have gone through the same problem and only a few have been able to diagnose the real cause of the problem. After much gruelling search I got to the base of the problem and it has got nothing to do with the touch pad ribbon or power button.
All the problem lies in the lid closing and the real culprit is the magnetic field sensor/switch which gets activated when the lid closes and doesn't go back to the default state or doesn't send proper signal to the system when the lid opens which makes the system believe that the lid is still closed and thus the power button does not work. Removing the ribbon is a half solution that forces you to compromise on touch pad , status indicator LEDs and lid close functionality. If you put the ribbon back in the system, the laptop works fine as long as the lid is not closed. But as soon as you close the lid the same magnetic field sensor/switch fault occurs. The solution is very very simple. In fact much more simple than removing or inserting back the touch pad ribbon.
1) If you have previously removed the touch pad ribbon, all you need to do is just put the touch pad ribbon back in all the way into the connector and lock it. Now just to check the system, close the lid and then open it up, now press the power button the system wont turn on. You can skip this step if you haven't tweaked/tinkered with the touch pad ribbon earlier.
2) Keep the system off, lid should be open and the battery in. It doesn't matter if the power cord is plugged in or not but its better if it is plugged in.
3) Ok now take a paper and put it on the palm-rest to the lower right side from the touch pad. To give you an idea, this is a 2 inch x 2 inch spot under the small sticker that says "New Revision Certified Design" and lies between the touch pad and the large sticker that shows system specs and features. Furthermore this is the very spot where the magnet in the LCD lid (located to the right side of the camera) comes in contact/proximity when the lid is closed.
4) Now take a light magnet with medium intensity, shouldn't be too strong or big and rub it in circles on that 2 x 2 inch square spot where you have placed the paper. Do this for a minute or two.
5) The paper is only optional but it is recommended as it would save the palm-rest from scratches if any.
6) Press the power button and voilà! you are done.
Moving the magnet in circles over the target area neutralizes or demagnetizes the problematic material, which can be any material near the sensor/switch or the sensor/switch itself.
Now do whatever you feel like. Close the lid while running, put it to sleep while running and wake it up by opening the lid and pressing any button, the system resumes normally and the display reappears. Now you only have to press the power button once when you cold-boot it. Power off, close the lid, open the lid and power on without worrying. And no need to go through the drudgery of RMAing it. This is such a simple solution to a problem that appears so big at first. In fact this solution doesn't even require you getting into the system by removing/lifting the keyboard and tweaking with the touch pad ribbon. Just moving a magnet in cirlcles over the area where the magnetic field sensor/switch is situated somehow rectifies the problem in that sensor/switch. I have done it myself and my system is working perfectly. I am happy now because I dont need to RMA my G53SW for repair. Those of you who are experiencing this problem, should atleast give it a try and then give their feedback. Good Luck Guys
ASUS G53SW ROG Laptop
Intel Core i7 2630QM @ Stock Clock
Nvidia Geforce GTX 460M 1.5GB GDDR5 @ Stock Clocks (for now)
14GB DDR3 1333 MHz (G-Skill + Hynix)
SAMSUNG 830 128GB SATA3 SSD + Seagate Momentus 500GB 7200rpm SATA3 HDD
HP x23LED FHD 1080p monitor
Microsoft Lifecam Cinema HD 720p, Logitech M315 2.4G Wireless Mouse
JVC HA-RX700 Headphones, ASUS ROG G1 Backpack with ASUS Eee Sticks 😛