> At the time, I thought he just meant that he had no idea what the solution was; but in hindsight I wonder if the real test was to see if I would crumble under pressure and write code I knew didn't work.

This doesn't totally make sense, most people would have interpreted that to mean they should quit talking and make their best effort to actually write something. It's not at all the same as pretending something works when you know it doesn't in an actual job, it's more like writing what you can on a test and hoping to get some partial credit.