You can stop the highlighting with :nohlsearch
:
:s/\v(.*)/echo "\1";/g | noh
That will still clobber the last search pattern; for full neutralization, use:
:s/\v(.*)/echo "\1";/g | call histdel('search', -1) | let @/ = histget('search', -1) | nohlsearch
Alternatively, you can switch to lower-level functions, to avoid the matching:
:call setline('.', 'echo "' . getline('.') . '";')
PS: You can simplify your search pattern; there's no need to explicitly capture something; have a look at the many other answers for how to simplify it.