On Moodle 1.9, when you add a new "Hot Potatoes Quiz" activity, you will see a screen for specifying various settings for adding a new "Hot Potatoes Quiz". Next to the "File name" text box, you will see a button that says "Choose or upload a file ...". Click that button, and upload your file (using the "Upload a file" button), and then click the "Choose" link next to your Hot Potatoes file.
Moodle 2.0 works in a similar way except that the activity is called a "HotPot" activity, and "File name" is now called "Source file name", and instead of a "Choose and upload a file ..." button, there is an "Add" button.
good luck!
Gordon