From Moodle 2.0 (next year) you will no longer find the Exercise module installed by default as part of your CVS version of Moodle. You'll need to install it separately from contrib.
It will still be part of Moodle 1.9 and all earlier versions.
I hope this is the right place to ask this question. I've started helping with the administration of a Moodle 1.8.1 system. Last night I tested upgrading it to 1.9.1. When I got the the modules section of the upgrade, it said that the Exercise module was "Standard (missing from disk)". When I checked the modules directory, it indeed seemed to be missing from the tarball I downloaded (The weekly stable tarball). Do you have any ideas what I might be doing wrong?
I am busy with a test install of Moodle 2.0-RC1 as an up upgrade from 1.9.9. and I have the exercise module in my 1.9.9 setup. I copied the mod\exercise folder the old server to the new test server as the installation indicated that it was missing from the disk. The upgrade run for a while and then halted saying that this module is not compatible with Moodle 2.0. How do I procede with the installation? Do I remove the mod\exercise folder from the new server? We do not use the module and I would be happy to go on without it.