A quoit can be an iron ring for throwing, a flat dolmen stone or the dolmen itself, according to the dictionary; so a game of quoits encircling the stones, thrown by the devil could be the answer... a good folktale wins over pedantry ;)
But sadly, it doesn't make any sense. The pegs that quoits are thrown onto are never referred to as quoits themselves. And the henge is so obviously quoit-like in shape, that it would seem obvious that the reference is to the earthwork. So if the term is used in its plural form, doesn't it make the most sense to assume that it also refers to the ring-ditches?