Consider a ASCII text file (lets say it contains code of a non-shell scripting language):
Text_File.msh:
spool on to \'$LOG_FILE_PATH/lo
If a Perl solution is ok for you:
Sample file:
$ cat file.sh spool on to '$HOME/logfile.log'; login 'username' 'password';
Solution:
$ perl -pe 's/\$(\w+)/$ENV{$1}/g' file.sh spool on to '/home/user/logfile.log'; login 'username' 'password';