I think this is a really important distinction. A whiteboard is a good place to draw out a system design and inform the whole room how the pieces need to fit together. It is an important skill as a developer once you get to a certain point and is not a bad thing to ask a candidate to do.

Asking to come up with a recursive pathing algorithm for your custom tree implementation in c on a whiteboard when they are applying for a ruby job maybe not so much....

CTCI-style questions on a whiteboard without any interaction from the interviewer is definitely a big red flag. Most of our whiteboard questions are solvable with simple if-statements, loops, and basic data structures; boxes and arrows are also appropriate if you communicate what's being abstracted away.