| am i right in assuming that "current directory" refers to the directory | in which the file being compiled is located? e.g. | if module Main has a declartion "import M" | ghc A/B/Main.hs | will look for "A/B/M.hs"

No. Our current idea is that "current directory" means "directory in which you started the compiler.

Generalising slightly - "current directory" means each of the directories in the search path, which by default just contains the directory in which you started the compiler. But you can change the search path using the -i flag. Cheers, Simon