Okay, I have everything through. This is how I got everything through:

1) Just copied everything from WSP to a entirely new WAP project, that was in its own solution outside DotNetNuke solution.

2) Used VS to convert it into WAP (mainly the generation of designer files). Do it by right-clicking your WAP project in VS & selecting the option 'Convert to Web Application'

3) Here again, I was stuck. I could not found an article explaining deployment of a WAP module. I kept expermimenting for the last 3 hours, and now have it through.

Basically, just publish your WAP module by right-clicking its project name, make a zip file containing necessary resources (.ascx, .dlls, .resx & off-course .dnn). Finally, upload the zip to DNN in a standard way.

I would always do it this way. Develop as WSP & deploy as WAP. I must say deploying as WAP also has another advantage. With WSP, you need to publish your entire DNN installation, and then pick up tour files from the compiled files. The DNN installation in itself can take a while to be published. But with WAP, this is a breeze.