galvanic isolation for lm555
I grounded the secondary side and it lets me simulate now. But the
  waveform at the output is not the square wave i am expecting


No it won't be a square wave with primary inductance at 100 nH. Irrespective of the secondary winding, just think how low an impedance this presents to the top and bottom (flat surfaces) of a square wave.

It looks like your square wave is about 5 kHz and so at 5 kHz, the 100 nH primary has an impedance of \$2\pi\times 5000 \times 0.1\text{E-6}\$ = 0.00314 ohms.

You need to make the primary inductance many times higher. For instance, the primary magnetization inductance for a regular 230 V 50 Hz transformer is in the region of 10 henries. If you accept a degredation of this to 1 henry then divide it by 100 to put it in the 5kHz range you are looking at an inductance of 10 mH (and not 100 nH). You are about 100,000 times too small in my off-the-cuff calculation.