The problem is not real world. The data is not real world. The solution is not real world. The entire dialogue is a fantasy. So why even engage in it? Were you expecting something real-world from it?
It was an interview. You're being unreasonable to put someone under an already high-stress situation and then saying, "Now we're going to conduct an extremely difficult experiment where you try to come up with the solution to a difficult problem in one fell swoop without any of the usual access to reference and the opinions of your peers."
It is bullshit, plain an simple. A bizarre artifact of a world where people have extreme difficulty evaluating software engineering skills. It bears no resemblance to how people in the real world write code or engineer solutions.
If you wanted real world examples why not put a pre-requisite to the interview to bring in working code that does what something relevant, and then discuss it in the interview? That's a far more realistic scenario with far more useful data than this little play-acting show that you're describing.
When I operate as the interviewer, I look for responses like the one the blogger gave at the beginning, where they start to really analyze the problem domain. People like this save millions of dollars in software engineering costs because they can look at the scope of a request and start to refine it (or outright reject it if it is unreasonable and they can cogently explain why it is so). To say these qualities are a "turn off" blows my mind. This kind of attitude is nearly as bad as the attitudes expressed in the reviled modern-google-interview, and competent software engineers who are not desperate for a job would do well to refuse to tolerate it.
After all, an interview is as much for the interviewee as it is for the interviewer. Most of the time, getting to an interview like this means that the company in question thinks you might be a good hire, and they're hiring to fill a void in their ranks. The interviewee is far from powerless.