Finally I got CM 7.1 flashed on my phone. The steps are fairly easy and can be found at following link.
In nutshell, you need to flash 3 zip files from at the time of booting.
1. CWM – clockworkmod which is a recovery software. This is better in than the stock recover software because it allows you to backup the current rom and some other stuff
2. CM7.1 ROM – this is the CyanogenMod ROM
3. CM7.1 Fixes – Fixed to CM7 rom
All the steps are mentioned in the above link, but the tricky part is starting the phone in recover mode. To do that, just keep pressing “power+home” buttons together after rebooting the phone. (“home” is the middle button in galaxy ace).
Happy modding. But one missing thing in CM7.1 is the panoramic mode in camera, which is very impressive in the stock gingerbread of galaxy ace.