Sql server: inserting into a table within a transaction for logging error occurance?

3 things: 1) please, please don't use cursors if you don't have to. 2) you can log by using either RAISERROR WITH LOG or by inserting data into a table variable and then inserting that into a real table after you've rolledback your transaction. This is possible because table variables are transaction independent.

3) Use the try catch block.

There is no reason to use @@ERROR now: TRY/CATCH is far more reliable. To understand more then I recommend reading Erland Sommarskog's "Error Handling in SQL 2005 and Later" which is one the definitive articles on the subject.

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