I think there's a business opportunity here. Imagine something like ETS's system for administering the GRE: Come into a location in your city at a particular date/time, sit down at a computer pre-loaded with various editors / IDEs for common languages, and run through an 4-hour coding exercise specified by the hiring organization, and, at the end, your code is provided to the hiring organization for examination. Internet access is freely permitted but it is fully logged and reviewable by the hiring organization. A proctor is present to keep an eye out for cheating and to resolve any technical difficulties. This reduces the pressure to something not much higher than working in a regular office.

Bear in mind that this is for the coding part, which people seem to have the most difficulty doing on a whiteboard under pressure. There would still need to be a conventional behavioral interview as well.

Somebody want to run the idea past YC? ;)