I tried importing to your course again, this time on a mac (OS 10.4.11) using Firefox 3.0.17 and it worked.
I tried it in our moodle instance and it did not work. So, I think it must be our Moodle. Something must have changed between the end of Nov, early Dec and late Dec. Our staff will be back this week, and I'll ask them to contact Moodlerooms (our hosts).
It is strange that everything worked before, and now none of the Hot Potatoes works in our Moodle. Thank you for all your assistance.
Moodlerooms, if you follow this thread, please let me know if there have been any changes in our instance recently!
thank you all and happy new year.
P.S. I just upgraded my browser to Firefox 3.5.7 - with the same results to my course "Parsing questions from import file." It must be our moodle.