It sounds like the FAILSTEP_OUTPUT contains newlines (that would cause the 'unterminated string constant' error in the 2nd post). You need to process the string in a variable without expanding it in the script code that gets executed (which happens when using %FAILSTEP_OUTPUT%):
INSERT INTO errors ("ErrorText") VALUES('[Escape(vbld_AllMacros().Item("FAILSTEP_OUTPUT").Va lue)]');
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