I think I got it setup using Webmin, bind, registrar offering child nameservers etc.
So, as of now, i have my ns1.domain and ns2.domain pointing to cVPS ips.
New domain domain2.com has ns1.domain.com and ns2.domain.com as nameservers and all seems to be working fine.
But, I am unsure what you mean by : setup ns1.domain.com as primary NS server?
What I meant is that you need to setup who the authoritative nameservers are for your domain. You do this with the registrar you got them at. It doesn't necessarily have to be "ns1.domain.com" (with 'domain.com' being your domain of course). It can be anything, though the standard syntax is ns1., ns2., etc. And it doesn't have to be on the same domain as the one you are configuring. But it needs to be setup so that people who query something like www.domain.com
will get a valid response from whatever nameservers you are using.