Sorry for the delay getting back to you all. I was out tutoring yesterday and now I've come down with a cold . Mary is right: the source of my problem was the "Enable trusted content" setting. And, as Mary stated, teachers are trusted but students aren't.
Ooo... and Mary: you guessed correctly, I think. You find me currently updating Moodle Course Conversion: Beginner's Guide for Moodle 2.0. I keep falling foul of issues like this, where there is a subtle setting that has been introduced or changed somewhere. Oh hum .
Thanks again everyone for your help,