The Moodle question type can be used but it's in early beta and has not seen development in the last year or perhaps even two. Realistically I think that the goal should be to try to develop it so that it works with Moodle 2 at this point. I have a student setting up Moodle 2 and trying to determine what the issues will be.
I'm hoping that the question type on Moodle2 will be more flexible than on moodle1.9 -- while the moodle1.9 module is pretty good it's still designed more for quizzes than for homework -- this is part of the reason why many webwork users have decided they liked the "bridge1" connection between moodle and webwork better (this connects on the assignment level)
For those more familiar with moodle however the question type would be better since the role of webwork is completely hidden from the student.
There is no easy way to batch upload questions for Moodle question type -- you can enter them into the Moodle question bank. This is one of the uncompleted issues that keeps the current implementation in early beta. To some extent it's more of an issue for developing the easy uploading of question banks into moodle rather than anything about webwork.
The other early beta issue is that while the majority of WeBWorK questions work in moodle question type, some do not -- particularly the ones that involve external resources such as a flash applet or an external graphic.
We're interested in solving all of this -- we just need interest and manpower. :-)
The syntax for writing the questions is the same as for writing any webwork question and you can find information in the author section of the wiki http://webwork.maa.org/wiki
Hope this helps.