Hallo Raghunathan,

you wrote:

1. The transmitter and reciever will now have different grounds and will be linked by the line GND. And I suppose that this will be the point to connect the shield of the twisted pair cable also.

If you have a pure safety class II application, where your PCB is mounted in a plastic housing, the shield can be connected to signal ground. You can use a shielded twisted pair cable, where '+Sig' and '-Sig' is transmitted via twisted pair, and where the shield is used to provide the signal grounds' connection.

2. For the receiver I have the following options - a regular instrumentation amplifier like the INA-101 or AD-524 ; the differential inputs of a PC based DAS card ;or any such. Yes the options are quite wide.

Exact! And if your choosen instrumentation amplifer provides some input protection scheme, you can even omit these protection diodes.
One thing is important: Whatever you choose, it must work as true differential amplifier!
If you want to proceed with analog signal routing in the future, you should really make the step towards true differential signal routing. All of your applications will highly profit from this! True differential signal routing is the standard of professional audio studio recording. Why acquiescing in a methode which is less professional?

Kai