Is there any way to access the variables in a dynamic sql which is declared outside the dynamic sql
Unless I am mistaken, the request is to ultimately dynamically construct a string to be executed that would be able to pull in local variable values that exist in the context that is executing the Dynamic SQL. For example:

The function constructs and returns something along the lines of:

SET @ReturnString = N'@Param1 INT = ''+@Param1+'', @Param2 VARCHAR(15) = ''+Param2+''';


The proc that calls the function EXECs that Dynamic SQL in the hopes of replacing the escaped-quoted parameters as follows:

SET @SQL = N'INSERT INTO dbo.spcallTracking (ProcName, SpCallDetails) VALUES ('''
              + OBJECT_NAME(@@PROCID)
              + N''', '''
              + @ReturnString
              + N''');';

EXEC sp_executesql @SQL;


and the desire is that @ReturnString actually renders as:

@Param1 INT = 2, @Param2 VARCHAR(15) = 'bob'


Unfortunately no, you cannot access variables that exist in the parent context. That would require an eval() (JavaScript / C# 1 / C# 2 / PHP)-like system stored procedure to execute the dynamic SQL in the current context and no such functionality exists, at least not in T-SQL.