Yeah, I think it's a nice solution but it only works in very narrow circumstances.

Once I was given a much smaller, unpaid task as part of the interview process. It wasn't a puzzle or trick, but something actually useful. All told it took me a couple of hours one evening. You might be thinking, "How much can you learn about someone from such a small task?" It depends on the task, of course. Mine was typical network code, with a couple of non-obvious but absolutely real-world edge cases. I spent time making sure my comments were great, and then wrote a man page. I think they learned some important things about me, and on my end it was an easily paid investment.