What is the reason for error message "N was unexpected at this time"?

It is not described what the batch file code should do at all. It looks like it should find the newest file by its name containing most likely a date string in name in a directory passed as argument to the batch file and should define an environment variable with name passed also as argument left to the directory path with the file name of newest file.

I suggest following commented batch code for this purpose:

@echo off
rem Remove this line if the environment variables defined by this batch
rem file should still exist after processing of this batch file finished.
setlocal EnableExtensions DisableDelayedExpansion

rem Delete all environment variables of which name starts with --.
for /F "delims=" %%I in ('set -- 2^>nul') do set "%%I"

:ProcessArguments
rem Get current first argument (option) with surrounding " removed.
set "Option=%~1"
rem Is there no more option?
if not defined Option goto EndBatch
rem Remove all double quotes from the option.
set "Option=%Option:"=%"
rem This condition is just for 100% fail safe code. It should be never true.
if not defined Option goto EndBatch

rem Does the option not start with two hyphens?
if not "%Option:~0,2%" == "--" (
    echo ERROR: Invalid option: "%Option%"
    echo/
    goto EndBatch
)

rem Get current second argument (folder path) with surrounding " removed.
set "Folder=%~2"
rem Is there no folder path?
if not defined Folder goto MissingFolder
rem Remove all double quotes from the folder path.
set "Folder=%Folder:"=%"
rem This condition is just for 100% fail safe code. It should be never true.
if not defined Folder goto MissingFolder

rem Replace all / in folder path by \ as many users type folder paths wrong
rem with slashes as on Linux/Mac instead of backslashes as required on Windows.
set "Folder=%Folder:/=\%"
rem Make sure the last character of folder path is a backslash.
if not "%Folder:~-1%" == "\" set "Folder=%Folder%\"

rem Search in specified folder for *.001 files output reverse by name and
rem define the option as environment variable with first output file name
rem assigned with full qualified absolute path even if environment variable
rem Folder referencing a relative path. Then shift the arguments list by
rem two arguments to the left and process the remaining arguments.
for /F "eol=| delims=" %%I in ('dir "%Folder%*.001" /A-D /B /O-N 2^>nul') do (
    for %%J in ("%Folder%%%I") do set "%Option%=%%~fJ"
    shift
    shift
    goto ProcessArguments
)

rem It is not possible to define an environment variable with no string.
rem So an error message is output if no file could be found like on
rem wrong folder path or no *.001 file found in the specified folder.
echo ERROR: Could not find a *.001 file for option "%Option%" in folder:
echo        "%Folder%"
echo/
goto Endbatch

:MissingFolder
echo ERROR: Missing folder path for option: "%Option%"
echo/

:EndBatch
set "Option="
set "Folder="
echo Options parsed successfully:
echo/
set -- 2>nul

rem Remove this line if the environment variables defined by this batch
rem file should still exist after processing of this batch file finished.
endlocal

This batch file can be started for example with the command line:

 stack.bat --para1 c:\Sample\temp "--para2" "C:/Temp/Development & Test!/" --para3 . --para4 "\Program Files\Internet Explorer\" -para5 .."

For understanding the used commands and how they work, open a command prompt window, execute there the following commands, and read entirely all help pages displayed for each command very carefully.

• call /? ... explains how to reference batch file arguments
• dir /?
• echo /?
• endlocal /?
• for /?
• goto /?
• if /?
• rem /?
• set /?
• setlocal /?
• shift /?

Read the Microsoft documentation about Using command redirection operators for an explanation of 2>nul. The redirection operator > must be escaped with caret character ^ on FOR command line to be interpreted as literal character when Windows command interpreter processes this command line before executing command FOR which executes the embedded dir command line with using a separate command process started in background with %ComSpec% /c and the command line within ' appended as additional arguments.

I suggest also reading:

• How does the Windows Command Interpreter (CMD.EXE) parse scripts?
  This question with its answers should be read first by every beginner in batch file coding.
• Problems checking if string is quoted and adding quotes to string
  This answer explains very detailed how to process arguments passed to a batch file.
• Syntax error in one of two almost-identical batch scripts: ")" cannot be processed syntactically here
  This answer describes common issues made by beginners in batch file coding and how to avoid them.
• Why is no string output with 'echo %var%' after using 'set var = text' on command line?
  Another extensive answer which describes how to work with environment variables in batch files.
• Symbol equivalent to NEQ, LSS, GTR, etc. in Windows batch files
  This also very long answer describes in detail how a string comparison is done by Windows command processor and what a batch file writer must take into account on using string comparisons.