A quick note to record the results of my joint investigation with Greg.
It turned out his server had an aversion to the word "from". Whenever "from" occurred in the left-hand side of multiple-choice option, the "internal server error" occurred after the quiz was finished.
If "from" was changed to "fro-m" or "fro m" the quiz results were returned and recorded without an error.
On other servers, the quizzes did not cause any errors. We tried other servers with the same version of Moodle (1.5.2), Moodle 1.6, Hotpot v2.0 and Hotpot v2.1. We tried adding just the error-prone quizzes to other Moodle sites, and importing the whole course into other Moodle sites. In all cases, the quizzes ran without a hitch.
Incredible as it seems, this server chokes on the word "from"
We decided not to pursue the problem any further, because the course will not run for much longer.