Kirsty,
You and I must have both angered the moodle gods...I was unable to save a quiz after editing with the same error message you described. I'm a linux user and my regular bowser is
Firefox. After much cursing (digging a deeper hole in moodleKarma), I tried different browsers. Lo! Epiphany and Opera worked fine! More digging...
The aha moment: I use an addon for Firefox called LoL (I'm not joking) which allows navigating a webpage without using a mouse; similar addons include "mouseless browsing" and "HaH" the progenitor of LoL. Anyway, it turns out that the LoL inserts a "hidden" x/html tag anywhere there is an input field on a web page. In the case of the moodle quiz, there were tags being entered in each of the Feedback text entry areas. Moodle didn't "ignore" these tags, thinking they were some type of legitimate feedback. When I disable the LoL addon or use a browser that doesn't add x/html droppings where I don't see them, everything works fine. I don't know whether this is an issue for the the Tiny/MCE folks, the moodle parser folks, the quiz module folks, or someone else. At any rate, you may want to try turning off browser addons one by one and see if this fixes your problem.
Vital Stats:
Moodle 2.1.1+
Quiz $module->version = 2011070100
Good luck!
Steve