Yes, this is clearly a tradeoff in the approach in that 2-way interviews have the potential to be extended, could even take twice as long. Working on a question/problem together is a great way to establish a working relationship from the start. If it goes really well, we'll always remember it. You gain insights into my thinking process, and I hear yours. This, as opposed to me just asking you questions one-way. For this to work though, maybe a short initial meeting to get to know each other on some basic level and to set the stage for the exercise would be a great way to start.

Ever had the opportunity to try this approach in some way? If so, how did things go?