The circuit you posted is a poor variation of the "old school" TIM circuit. A hall sensor in theory will activate it but the resistor values on the front end are pretty low value and depending on the sensor it might not be able to drive the circuit and/or may damage the sensor. The problem with all of the original TIM circuits is the output transistor breakdown voltage. In order for a coil to work properly you must not supress the kickback voltage generate on the primary side of the coil when the "points" open. When you use conventional points there is no problem since the points gap is quite large.
In the case of the TIM circuit the transistor breakdown voltage is perhaps (unchecked for the particular transistor) 150volts at most. This will limit the seconday Hi voltage to 150v x the turns ratio of the coil. Typical turns ratios are about 100:1 therefore the secondary will only get to 15kv. That's probably more than enough for a model engine but you can do better.
Try my circuit below. It has the following improvements:
1. The front end is designed for a Hall sensor.
2. The first stage does not sit around consuming a lot of power when the engine is not running. The circuit you presented consumes considerable power just sitting there doing nothing.
3. A big problem with all of the TIM circuits was that it was possible for the engine to stop with the ignition activated which could (usually did) burn out the coil and or transistor or both. This circuit will not do that.
4. Most important is, this circuit uses a proper IGBT transistor to drive the coil. One that is made specifically for this purpose for automotive ignition systems. It has a very high breakdown voltage.
5. A little extra benefit is the LED which blinks when the Hall sensor is activated so you can tell if there is activity.
6. The input circuit can be run on the same 12v as the rest of the circuit but need not be. Just be sure the ground is common to both supplies.
7. And the best part - the IGBT is a logic level input device so, if you are so inclined you can elminate the front end altogether and drive the IGBT base with a microprocessor or logic chips.
Note that the symbol for the IGBT transistor is not precise. It's drawn like it is to make if familiar to the original circuit. The IGBT is a TO220 device so you'll need to consult the spec sheet to get lead orientation.
With a little ingenuity you should be able to use your existing circuit board by leaving out components and perhaps cutting traces and adding jumpers.
[EDIT Feb. 22 2013]
Updated drawing. I had the wrong part number variant for the IGBT transistor. Sorry. All is correct now.
Sage