Hi Nabeel,
Regarding the scenario you are describing, when you run tests as part of Team Build 2008, the default behavior upon failure of the tests is to mark the build as partially failed, not fully failed. When the build gets to the gated checkin step, it will check in unless the build is "fully" failed. This behavior is by design and depends on the behavior of Team Build 2008. In order for your scenario to work as you desire it to work, you will need to fail the build upon failure of the tests. Aaron Hallberg describes this in this blog post: http://blogs.msdn.com/b/aaronhallberg/archive/2007/11/05/how-to-fail-a-build-when-tests-fail.aspx.
As for the bevaior of the build not showing up in Build Explorer when triggered through the checkin validation tool, this is a limitation of the current public version of the tool. Unfortunately, you will need to refresh the Queued tab in Build Explorer manually to see the build show up in there. I have made this change in a non-public version and if it helps, I will port it soon to the public version of the tool.
Hope this helps.