I am trying to centralize the building of all the view instances using a centralized class called Factory. Had instantiated the factory class inside model. But later on, this structure started creating problems. So asking it here. Where should such "factory" classes be placed inside mvc. How should they interact with the model, view and controllers ?
Working with an MVC structure does not mean that you need to forget other best practices. It's just a way of structuring an application into 3 (or 4 in the case of RL) tiers that make sense and push you towards writing clean code.
Models should never ever ever do anything that is view related. A factory that spawns display objects should be placed in the view tier. When and how that factory is instantiated, initialized and used depends on a number of factors. Since you're using a DI/IOC framework, the obvious choice for instantiation is by setting up an injection rule. As to what parts will be using the factory there's a number of possibilities: it could be passed on to the context view by the context view mediator. Or you could choose to dedicate a command to do the heavy lifting. Or you could encapsulate its usage in a separate class that listens to system events and responds accordingly (a sort of view-less mediator)
One minor thing: Factory is way too generic a name for the class. It communicates no intent at all. You should choose meaningful, descriptive names for your classes. If the factory creates view instances, at the very least it should contain 'view' in its name. You have to find a name that is specific enough, but doesn't tie down to a certain implementation. It depends a little on what level the class operates.