Is the machine a real machine or a VPC? Is it on a network or standalone?

Its on standalone.......................

That's likely the issue - try the following at a command prompt

net stop sens

Office looks at the network sensing service (what that command stops) to see if
there is a network present - if it doesn't find one, it assumes it cannot
contact the server. This is only necessary is the case where the client and
server are on the same machine and not networked.

I did try that. After running in the command i got the
message "The system event notification on services
stopped successfully". But I still the error on
publishing. what am i missing?

How is name resolution being done on that system - DNS, WINS, or a hosts file?

DNS-specific, wins-standard.
Let me know if you need more.

Do you have any active networking at all on the system? If not, add a loopback
adapter device from add/remove hardware, give it an IP address, and make sure
that IP address is mapped to the server  name you are using. Also make sure that
you start Excel after you have disabled the service. The disable will only last
until your next reboot, so you'll have to run it each time.

I did disable the service before i stated Excel.
I am using the default ip add: 127.0.0.1. It works
either i use server  name or the IP add. Since its not
on Lan my network drive is disabled.

I have read that Office 2003 PRO is required.
Check this before digging deeper into your network config.

ok i am adding microsoft loopback adapter

I am little weak in Networking stuff. I
installed Loopback adapter and configured a new IP
Add. I disabled the Lan and tried configuring the new
IP with the sharepoint portal. It get an error saying
"bad host name" when i access my portal.

Where am i doing wrong.