The thing is - although usability is, at the end of the day, an different world altogether than graphical design, they do share characteristics. The Gestalt laws are a good example of principles used by good UI designers and graphical designers, because they play into how people perceive things. And the way a user perceives affects not only whether s/he finds the perceived pleasurable, but also can either facilitate or seriously hinder understanding what they see.
There is a basic division about issues of a UI that I find helpful (thanks to Gabriel Michel at the Uni of Metz who introduced me to this division) :
Perceptive (before understading; the user cannot properly perceive what there is)
Semantic/navigational (the user perceives the UI but does not understand what s/he perceives)
Action-related (the user understands what he sees but does not know how he can react to it; for example, to manipulate it)
"1. The Add new question drop down on the quiz page layout is confusing. It is not clear where the question will be added to [when the user does what?] (on the question bank you see the category name in drop down above). I added a question [using which dropdown?] and found that it was added to the category selected in the question bank, if there is a default set one would expect it to be the quiz category given the location of the button[which one].This needs to be removed it's confusing and is an unnecessary duplication. "
Returning to point 1., can you please explain which "add question" dropdown does what for you by default. (You can see what I did not understand about your comment in the quotation above.)
You indeed did bring this up earlier: http://moodle.org/mod/forum/discuss.php?d=103869&mode=3#p461611 And I replied with the fundamental reasoning behind the change. Please tell me if you are unable to connect all the dots there, I know the documentation is not ideal. The testing I did does not seem to suggest that users have problems identifying that one drop down is in the context of a quiz, and the other is in the context of the question bank. In addition, novice users actually only see one drop down, since the question bank is hidden by default. Challenging the design solution would then require either finding problems in the argumentation in the thread, or showing with usability testing results that what you speculate actually happens.
Tim, for me, too that checkbox for selecting all questions is problematic, since it does not actually get checked itself when you select it, only the actual checkboxes do. Also, I am not sure if it communicates sufficiently what it does - it seems to me that although in windowing applications they've used that way of selecting all checkboxes, in the web nowadays the links for selecting/unselecting all is more common. Of course, I suspect this is not a major issue, many users will probably find it eventually.