Thanks George.. That script work very well.. But I got an issue.
I run the SQLCMD for named instances too.. Suppose, when i execute my script again a named instance say "serverA\SQL2K". The below stmt
sqlcmd -S %1 -E -i "X:\script.sql" -o "X:\%1_scriptout.txt"
will be executed as
sqlcmd -S serverA\SQL2K -E -i "X:\script.sql" -o "X:\serverA\SQL2K_scriptout.txt"
This gives an error because the path "X:\serverA\SQL2K_scriptout.txt" does not exist.