People are always incredibly nice when they want something (like a job) from you. If you really want to see how diplomatic someone is, you have to pay attention to how diplomatic they are when they don't have to be. That's why (for instance) a lot of employers pay special attention to how polite you are to clerical staff and others who aren't involved in the hiring process.

I would think everyone would know this by now, but amazingly they don't.

I remember long ago interviewing a fellow. I asked him why he wanted to work for my employer. He answered that he wanted someone to pay for his move to Seattle where he could go skiing. People can be astonishingly dumb sometimes.

Yes, and I did and still do many astonishingly dumb things.

Baffling on the face of it, but I think he answered that question when he said he wanted to be paid a compliment. I took that to mean he just wanted reassurance that he and his company did not come across in a negative light. Maybe they weren't the best, but at least it would be reassuring to know they didn't "suck".

False dichotomy. A third option is meaningful, constructive feedback. Only things they can improve.

Right, because they need someone just out of school to tell them how to improve their business. LOL.

They do if they are concerned about losing too many viable candidates to competing employers, which seems likely since they sought feedback.

Apparently they liked the guy. Even if the fit isn't right for this particular candidate, he might be able to refer (good) developers who are. I recall reading about some CEOs treating unrecruited interviewees as recruiting tools for their good friends. Always seemed like a sound idea to me.