The issue was with the compiler versions mismatch(I had vc6 for php and memcache was build from vc9). One of the posts from this discussion states php has dropped support for vc6, so I reinstalled xampp which had php 5.4 with vc9. Used the memcache dll in http://windows.php.net/downloads/pecl/releases/memcache/3.0.6/php_memcache-3.0.6-5.4-ts-vc9-x86.zip and everythin worked fine!
Thanks for the help.