Hi Daniel,

Actually, I never use the Image to display functionality in a Quiz. I find it more ergonomic to put a link to a media file (image, sound, movie, etc.) inside the text of your question.

For an MP3 audio file to be "embedded" in a tiny flash player (see attached screen dump), of course, admin must have enabled the multimedia plugins in the Filters.

Enjoy,

Joseph

This is a reply to a private message from Daniel asking for more info about inserting a link to an MP3 file within a quiz question.
There are various ways to insert links to media files in Moodle.
You can
(1) insert a link which when clicked will open a new window activating your computer's default media player (e.g. quicktime, realaudio, windows media player, etc.)
(2) OR rely on the automatic insertion of the small Flash player built-in Moodle
(3) OR both!

Result (1) will be achieved if the Flash player has not been activated by admin.
Indeed, for the small Flash player to appear, it must have been activated by the administrator of your Moodle site. Logged in as admin, go to Administration » Configuration » Filters, and move the Multimedia plugins option from the Inactive (right) to the Active (left) column.
Sample coding in text of a quiz question (you need the HTM editor to be activated, of course).
(3) method to display both a link and the Flash media player

1. In the question text, type "Listen to this sound and say what you heard."
2. Select this sound
3. Click on the Insert Web Link button
4. Give the address of your MP3 file, either a web address or an internal address of a file located in the moodledata directory of your Moodle course.
5. Toggle HTML source and view the result, something like this:
   Listen to < a href="http://moodle/file.php/2/audio/trumpet.mp3" >this sound< /a > and say what you heard.
6. Now type in the rest of your question data, depending on its type (MCQ, short answer, etc.).
7. The result will look something like (3) in screen dump below.
8. The student has a choice of using the Flash player (with its minimum buttons) or clicking on the link, which will open the computer's default media player, with all its buttons.
   

(2) Method to get the Flash player only, and no link to open an external player

1. In the question text, type "Listen to this sound xxx and say what you heard."
2. Select xxx
3. Click on the Insert Web Link button
4. Give the address of your MP3 file, either a web address or an internal address of a file located in the moodledata directory of your Moodle course.
5. Toggle HTML source and view the result, something like this:
   Listen to < a href="http://moodle/file.php/2/audio/trumpet.mp3" >xxx< /a > and say what you heard.
6. Delete xxx
7. The result will look something like (2) in screen dump below.
8. The student can only use the Flash player.

NOTE that it is also possible to embed an external media player in the HTML code of a question, but this requires that admin has enabled this embed facility, which is not recommended for safety reasons. Also, embedding works differently in different browsers; the result depends on the student's actual default media player on his computer (and its version) and the final result can be quite unpredictable. This is why the Moodle Flash media player, although limited in its capacities, is my preferred solution.
Hope this helps.
Joseph