I want to calculate the average of a set of angles, which represents source bearing (0 to 360 deg) - (similar to wind-direction)
I know it has been
Maybe you could represent angles as quaternions and take average of these quaternions and convert it back to angle.
I don't know If it gives you what you want because quaternions are rather rotations than angles. I also don't know if it will give you anything different from vector solution.
Quaternions in 2D simplify to complex numbers so I guess It's just vectors but maybe some interesting quaternion averaging algorithm like http://ntrs.nasa.gov/archive/nasa/casi.ntrs.nasa.gov/20070017872_2007014421.pdf when simplified to 2D will behave better than just vector average.