At one place there was a bug squash interview like this. Rough idea was we wrote a very small version of a system we had in our app (some data-syncing-then-displaying service), with a handful of bugs and a very simple feature request.

It was very helpful for sanity checking if a person was able to be in front of a computer. There's a bit of a challenge because I think there's a pretty low ceiling of performance (strace on a Python program is fun, but our bugs are not that deep!), but we could use it to also talk about new features on this mini-system and whatnot.

General feeling on it was "this is a great filter", because ultimately we needed people to just pass above a minimum skill bar, not be maximally good at coding. And having the exercise really helped to communicate the day-to-day (which can be tedious!)