The whiteboard is only useful as an aid in explaining an algorithm. If a candidate can do that without the whiteboard, even better.
My bigger concern is that for a job that specifically highlighted the need for at least some SQL skills and some Java expertise, a candidate that can not, even after prompting, write a for loop in Java (or in any language, when offered the chance to do so in a "favorite" language") or write a SQL statement that joins two tables probably can't do much of anything, let alone work on interesting problems.
Here is the cold, hard truth - I know, both because of my own limitations and the opportunity of the job, that we are not going to get top % hackers. But if you apply to a job where the primary need is coding in blub, I think its fair to expect a simple question or two about basic blub constructs. I myself would be nervous about whiteboard coding for something complex, but also generally offer (in a cover letter) to provide some code examples to talk through at an interview ahead of time.
I think it behooves us all to have at least some baseline expectation to demonstrate some competence. Remember, I'm not thinking that whiteboard coding of an algorithms or anything.
I think a very fair (and concerning to me) insight might be: if you can use Google and an IDE, can you do all that this job requires?
In my geographic area, this salary range is somewhat below corporate IT work (say 10% to 15%), but generally higher than the typical university software dev job listing. The university is really bad to list jobs and job requirements with laughable salaries. I have seen (in other departments) web app dev jobs that require significant front-end and back-end skillsets/experience and then pop a salary that is full 50% less than entry level jobs for CS undergrads.
One problem is that hiring departments in that position will find someone to hire at that rate, so they think it was correct. From personal experience, I can verify that "good on-paper" candidates with exceptional credentials (say MS in CS, bunch of experience) from other depts who look to join our team are unable to to write any code at the whiteboard at all (say a for loop in java to println something). But to be fair, a recent job interview cycle one of my teammates performed produced exactly two candidates out of 16 who could do this and only one of those could write a SQL statement that required a simple inner-join. Most of those folks were external, so it's not just a problem inside the institution.
I have a number of cynical and embarrassing opinions about this situation.