So much time is wasted in trying to accommodate off-by-one errors (which are a sin in production...just like integer overflows)
Off by one is (generally) a much bigger issue. Take for example a buggy binary search which runs infinitely on even length arrays because it gets stuck with the length 2 case. This is a much more likely (in terms of runtime) bug to hit than integer overflow.
Though I generally agree that it isn't too big a deal. I would just mention that there was a bug and only if they couldn't find it would it possibly be an issue. I wouldn't penalize anyone for missing null-pointer checks unless given a valid input (non-null pointers) their algorithm failed because it hit a null pointer.
To tell you the truth, I am ok with coding questions. In fact, I demand it. What I'm not ok with is demanding inch-perfect code in 20 mins. The only people who can be perfect are the ones who are doing the exact same problems everyday....not the ones who are doing production work.
I think that issue with binary sort is not really relevant to interviews. Having a bug with integer overflow is not what an algorithmic question is trying to test.
If you want to test knowledge of undefined behavior show them code with a bug in it and ask them to find it.