Anyway, I went on to be hired and then promoted through dev lead, dev manager, and architect roles at that company.
So, I'm not of the mind that it's something to worry too much about if you're a decent hacker. My more recent interview sessions, I've pretty much always been wearing a suit or at least business casual, but I wouldn't say it's a hard-and-fast rule, especially for a startup and junior position. Still, YMMV.
If a company makes a huge deal about you not being well-dressed then they probably aren't going to be the most flexible company to work for. I know I don't tend to judge candidates specifically by the way they dress, but those who look comfortable in nice clothes do come across more professional.
There are a lot of ex-City people here, which may be where the expectation comes from, but even so...
That explains everything.
I had a friend who actually got turned down for a management position for wearing a suit to an interview (they thought he was "too formal" for the job). PayPal, I believe.
I rock the Silicon Valley Casual for interviews-- jeans and an untucked button-down shirt for consulting gigs (and employee-jobs that I already know I want).
If it's a really creamy consulting gig for a large company, I might even make it slacks, semi-dress shoes, and untucked button down. Regrettably I don't have the complexion for khakis, since blue button-down, brown semi-dress shoes and khaki slacks [with cell phone on a belt clip] appears to be the uniform of choice around here large boring companies that think they're casual.
For startup interviews, I will wear a funny t-shirt, often involving pirates.
You will note that I never overdress beyond these levels (for an interview), as the casual dress is part of my filter against stupid, boring companies.