It has all to do with scoping. my declares a variable for the current scope. Basicly, a scope is a part of code between { and }. Or at least, that is how I understand it. Please, monks, correct me if I'm wrong.

But, with this information, it's pretty clear why your code is not working:

...
         if (/^##recstart/) {           
                 my ($junk,$recno) = split;

  # $recno declared for this block
                 $recno =~ s/'//g;      
                 }
         elsif (/^##v/) {
                 my ($junk,$qno,$junk2,$vtext) = split (/ /,$_,4);

  # both $qno and $vtext declared for this block
                 $qno =~ s/'//g;  
                 $vtext =~ s/'//g;
                 }
         else {                                  

  # nothing declared at all for this else block
                print OUT "$recno^$qno^$vtext";
                }     
        }
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