Some of this is fair criticism of Oxbridge, some not so much.
The 'grand formal settings' for interviews are the buildings most of the colleges have -- and one of things that make them such incredible places to live and work. Yes, you could erect a small, casual prefab to conduct your interviews, but that would be kind of dishonest.
On the other hand, Oxbridge probably is unhealthily attached to some of its weird old traditions (gowns, Latin, port, etc.). These things also vary widely between the colleges -- but in ways that are hard to find out unless you are (or you know someone who is) on the inside.