amizanj,
Yes, you can redirect tomcat output to a file instead of the console. You need to follow these steps to redirect the output to a file :
1) Configure Tomcat 6 server under Window > Preferences > MyEclipse > Servers > Tomcat > Tomcat 6.x , select ‘Enable’ and click Apply
2) Click on ‘create launch configuration’ which is under Tomcat 6.x > Launch
3) Switch to ‘Common’ tab, select ‘File’ option under Standard input and output section and select ‘workspace’ / ‘File system’ to create the file. (Please see the attached screenshot for a visual reference)
4) After selecting the file, click Apply and then Run.
Performing the above steps will create a new launch configuration in the server view and running that server will add the output to the file selected in step3.
You can also use log4J for logging in tomcat. Please take a look at this link which helps you in setting up logging for Tomcat.
Hope this helps and let us know how it works for you.