This week's book giveaway is in the OO, Patterns, UML and Refactoring forum. We're giving away four copies of Refactoring for Software Design Smells: Managing Technical Debt and have Girish Suryanarayana, Ganesh Samarthyam & Tushar Sharma on-line! See this thread for details.
Yes, placing an exploded war into the deploy directory works with the hot deployer. Juts make sure that your directory name has a .war extension.
I recommend, however, that you do not unpack the war file directly into the deploy directory - the hot deployer might try to deploy the app before it is entirely unpacked. Instead, unpack the war file into a temporary location (on the same disk partition) as the deploy directory and then move the exploded war directory to the deploy directory. This way the entire eploded war show up at the same instant.