Hi :),
Is it possible to use the Arduino UNO r2 to program other AVRs just like an AVRisp programmer? I checked the old forums and found out that the Arduino UNO couldn't be used for programming other AVRs. But it was also written that the problem would be taken care of on future revisions of the platform. And the UNO r2 (from the name itself), is a revised version.
So, anyone tried this yet?
Yes, I routinely use the Uno with the arduinoisp sketch for programming atmega mcus. You need to disable the auto-reset or program it with a new bootloader. See the Microcontrollers section of this forum and Prototyping small embedded projects with Arduino | David Crocker's Solutions blog for more details.
Thanks. That was informative. 
But is there any way to use the Arduino to program AVR mcus using AVRDUDE in a command line interface, rather than using the Arduino IDE?
I m okay with using the IDE if there is no other way, but still...
Yes, you can use avrdude directly with arduinoisp. On the blog entry I linked to you'll see the avrdude command I use to set the fuses. Just modify that command to do whatever programming you want to do.