The Cloze/Embedded question type is useful to create tests of the "fill in the blanks" variety. This can be done using Hot Potatoes' JCloze programme, but Moodle's Cloze question allows a wider variety of "sub-question" types: MCQ, numerical, short answer, regexp short answer (if you have installed it on your Moodle).
Unfortunately, there is no user-friendly interface for entering Cloze questions in Moodle and you have to type in the code, which is time consuming and error prone.
I am proposing the Cloze_JR utility (for Moodle 1.6+) which aims at making things slightly easier. This utility consists of a single file residing in a single directory, which you simply drop into \moodle\question\format\. It collects all the questions from a given question category in your Moodle questions bank and automatically generates a single Cloze-type question with them. It will optionally insert the blanks to be filled in their proper place.
Please download, install, test and report!
Please note that this utility does not create anything in the database and does not make any other changes to Moodle, so should be quite safe to use even on a production site (Moodle 1.6) but please use it on a test site first.
If you prefer, you can test this utility on my own test site. E-mail me for a teacher username & password and instructions.Joseph