I like this idea as the more advanced version of whiteboard programming from the year 2000. Even if you still do whiteboard programming, give them a PC / tablet, and allow them to do some Google searches. Then, you could even make the problem a bit harder to solve. Again: You are looking at the candidate's problem solving process holistically. I also very much agree with your second paragraph. Some of the most pleasant surprises I had during interviews were candidates who had very limited domain knowledge, but tried as hard to possible to make educated guesses, or ask intelligent questions. It shows a lot about a candidate.