We are currently going through the same daunting process trying to hire a PHP developer at CollegeHumor. I would say 70% of the applicants we interview cant answer basic computer science questions. We don't give a written technical test. We don't expect a developer to be able to code on paper. In a real environment they have access to tools, compilers, docs, etc. It's an unfair and unnecessarily stressful test.

Good luck with your search.

Shameless plug: If your interested in a development position at CollegeHumor in New York City... Email [email protected].