1. In the part of the circuit posted below the separation between the 110V AC trace and ground plane is just 5mm can it create any problem? Should it be increased to 8mm?

Yes, I would! May be 5mm is ok with 110VAC, but I would increase it to 8mm, at least! Not only for safety purposes, but also to decrease stray capacitance and by this the injection of interference.

2. On this page they say that any enclsed or loop area can cause EMI troubles. The ground plane on top layer contains such ground areas. Can it create any problem?

This warning is addressed to people NOT using a solid ground plane!
Minimizing of loop areas can be furtherly achieved by placing portions of ground plane between the signal traces on top layer. But don't forget to connect the local ground areas on top layer to the solid ground plane of bottom layer BY MANY SEPARATED VIAS. This is what Rob once 'strongly recommended'...
Using this methode of ground plane fill will minimize all loop areas automatically. This methode is only topped by the use of mulitlayer board...

By the way: Prahlad, don't worry too much about your layout. Up to now it looks very nice. Much better than some 'professional' layouts I have seen in my career.

Kai