What is the origin of photons in supernova explosion? How and where (the ejecta or the core) are the photons (that we are receiving on earth) are produced in supernova explosions? What I understand is that the kinetic energy is converted to thermal energy which diffuses out as radiation, but what is the radiative process in action here?
Is the origin is solely from the radioactive decay of Ni-56 that produces gamma rays, that is reprocessed into optical photons?
 A: The radiation arrives from the "photosphere" of the supernova - the surface at which any  photons produced are able to escape into free space.
Interior to this surface photons are emitted and then absorbed again, without escaping. Since there is a temperature gradient from the inside towards the outside, then there is a gradual diffusion of energy outwards.
The situation is not dissimilar to what goes on inside the Sun. The photons produced in or near the core are predominantly X-rays, but they don't travel very far. Near the solar photosphere, the temperatures are much lower, only 5800K. At these temperatures the primary source of continuum opacity (and therefore also of continuum emission) is free-bound interactions producing H$^-$ ions.
It turns out that during most of their visible lives, the light from a type II supernova comes from gas at a similar temperature to the Sun and via a similar mechanism. Note that type II supernovae arise from the core-collapse of a massive star and have hydrogen-rich envelopes so that H$^-$ opacity is important.
For type Ia supernovae (exploding white dwarfs), there isn't a hydrogen-rich envelope. The photospheric opacity is caused by a blanket of closely spaced bound-bound transitions in atomic and ionic species of elements like iron, nickel, silicon, carbon and oxygen and it is these transitions (and some scattering by free electrons) that provides the photospheric emission observed, generally at higher temperatures than the Sun - about 10,000 K.
You need to separate out what provides the underlying energy that is radiated away, which is governed by processes (like radioactive decay) happening in the interior, and the radiation that is observed, which comes from the photosphere.
