Resolution:
If you are using a SOAP RR or Invoke partner activity and you want to log the request and reply data,
Use the following tracing parameters:
java.property.com.tibco.plugin.soap.trace.inbound=true
java.property.com.tibco.plugin.soap.trace.outbound=true
java.property.com.tibco.plugin.soap.trace.filename=C:/soap.txt
java.property.com.tibco.plugin.soap.trace.pretty=true
java.property.com.tibco.plugin.soap.trace.stdout=true

These parameters will work as long as the following conditions are met:
1. The file 'C:/soap.txt' already exists.
2. You have added the properties to the application tra (after deployment) or bwengine.tra (before deployment) file.
2a. If you are using designer add the parameters to the properties.cfg file.
      For usage instructions check the BW documentation.
            TIBCO BusinessWorks Administration>
            Chapter 8 Custom Engine Properties>
            Setting Custom Engine Properties for the Testing Environment
3. The Invoke partner tracing will work only with SOAP endpoint and not the local endpoint.