I lopped off a block of the code, made it run without the rest of the code base and explained what it was supposed to do. This wasn't that simple, but could still be explained in about a minute to somebody with familiarity in ML (assumed; that's what we're hiring for). I then challenged the candidate to spot any bugs and implement a feature.
This really wasn't that hard. I've done the same thing twice before in two completely different industries.
Why would that be impossible for you?
As I read it the main observable difference between your exercise and the kind of exercise you're arguing against is that you are starting with some baseline code that the candidate is supposed to modify. That seems like a pretty good idea, but I haven't used it yet.
If you can't do that then you should probably worry about your own skills before testing somebody else's.