Yes, I agree. Are we supposed to also assume that our bosses and interviewers lie to us, too? At no point does he say that he is emulating a user that needs support help.
It's just testing the basics really
This means - to me - that the network... well, works. And it clearly does not. If this was a Windows machine I'd probably wonder what the hell was going on with the Ethernet (!) sign in the bottom right of the tray and if it was a decent version of Ubuntu (11.x or earlier) then you'd also notice it quickly.
But still. He's pretty obviously leading the person astray by giving him the solid impression that the machine is in good working order. (which it is not) If you mean to say that he didn't CLEARLY specify that the "cable was fully seated..." I don't know what to tell you. That's a "gotcha" question. Not a good diagnostic one. Unless this is for a $12/hour CSR position. In which case, OK fine.
If you can't solve a problem with only some information, and some of it incorrect, then how are you supposed to be able to help?
So you lie to them? I don't understand what the point of this test is. My first inclination is to open up a term and ping google but I would be pretty annoyed that your "first-wave" test involved actively lying to a candidate.