Dear Gautham.
The total energy in the system is given by


T = 1/2 m2 Vo^2 + 1/2 m1 Vo^2 + 1/2 I wo^2 
= 1/2 m2 Vf^2 + 1/2 m1 Vf^2 + 1/2 I wf^2 - m1gd + uk m2g d

where Vo,Vf are the initial and final velocity of the blocks, wo/wf are the initial and finalangular velocity of the pulley, I is the moment of inertia of the pulley. w is related to V as

Vo = R2 wo and Vf = R2 wf. 

Also, the moment of inertia is given by

I = 1/2 m (R2^2 + R1^2)

You have all the data now, you can go ahead and solve for Vf in the energy equation above. After that, you can calculate wf.
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