Definitely. Seeing how someone handles a real project, a real challenge with real consequences and timelines is arguably the better way to do it. To find the good candidates you still need to weed out the bad ones, but it's not hard to see who is the real deal by just sitting down and having a chat with them.
When I worked for the ABC here in Australia for a short contract position there was a room of about 10 people from different teams (designers, journalists, developers, managers) and each of them had a copy of my resume. They asked questions based off of what I put on my C.V to see if my answers matched. I thought that was brilliant, ask questions to see if your answers matched and if you were the real deal.
I reckon a spoken interview where you get to know the person and ask them a bit about their experience (not ask them to solve problems) will get you 85% of the way and the other 15% is if they can handle the pressure of the workplace and work well with the team. A few trial hours (unpaid) where you bring in your candidates, sit them down with your team and see how they handle things would definitely go a long way and cost nothing.
Seems I have struck a chord with someone who down-voted me. Would that person care to elaborate?