My current opinion on this would be to offer a laptop so you aren't disadvantaging candidates who don't have one too badly, but let people use their own if they have one (and let them know ahead of time that it will be an option and what they should be set up for.)
In the past, I've used CollabEdit for "phone screens" and the whiteboard for in-person interviews. I try to ask some "coding" questions (identify a better data structure / algo for a particular scenario and then implement it in code) and some problem-solving conversational questions. Seems to work pretty well, but I'm always on the lookout for better approaches. Part of the problem is that the software field is so broad that it's hard to get a sense of a person's abilities with such a limited amount of time to ask questions.
Would you rather a laptop w/ standard editors and IDEs or would you prefer a google doc, collabedit or a whiteboard like many places do?
Moreover, if you're that useless without your dual monitors and a full-size keyboard, would a whiteboard-based interview be any better?
Could you use this specific scenario to view how the candidate would react? If he starts to complain that the right tools are not on the laptop, or he is unfamiliar with environment, does it is signify that he is focusing too much on the tools rather than on solving the problem?
Maybe his time management skills needs some work, ie limited time to solve the problem and too much time worrying about environment.
Like make a table view that has word counts for a string. Or make this simple puzzle game. Or make a simple address book app.