it's marked internally, yeah. it's just treated as another internal school assessment, albeit a pretty big one, and goes toward your internal assessment mark.
the whole project (proposal, journal, essay and annotated bibliography) is worth 80% of your internal assessment mark, which equates to 40% of your overall HSC mark. the breakdown of your HSC mark, in other words, is:
40% major work
10% trial
50% HSC exam