In scenario 1, fraudster is also getting paid, ties up members of your team attempting to train them, and your timeline of getting an actual hire is pushed out until the company figures out they messed up. Seems worth the effort to prevent.

Some effort? Sure. Raking prospects over coals in discriminatory interviews that don’t actually test for coding ability? Nah. Bad hires are bad, not disastrous and the response in the industry is wildly out of proportion.

-Fraudster gets hired and starts committing code. There is some disagreement as to whether the fraudster is a fraudster or not, but the non-technical boss sure loves him and they often go to lunch together. More code committed. Then he starts making major design decisions.

Sounds to me like an issue with the boss, not the hire alone. Why torture applicants?

Good candidates don't think of writing code as torture. Talking about code is a necessity but not the best demonstration of skill.

I never said that writing code is torture. CS trivia, whiteboard coding, unpaid homework assignments, and "hacker" online tests all have nothing to do with the job itself. Talking about code is the best way to demonstrate skill in a limited amount of time, such as an interview. I gain much more information about a person talking with them about development than I would through any of the above methods.