Our current backup process is doing a SVN HOTCOPY every night, to a backup location on a different machine. Can I somehow recover from that backup and retain all revision histo
I would do much more then simply run a hotcopy every night. I would use "svnadmin dump" to create a history of revisions into a dumpfile, which can be restored to a working repository.
You should be backing up these dumpfiles to tape or offsite disk as is standard backup procedure. If a corrupt repository persists over several days before it is caught (such as on a weekend or holiday), you can go back to the last good file.