I've personally found that it is much easier to think about the product outside of the office when you aren't wearing yourself down with a 40-hour work week. When you hit the 40 hour mark, work dwarfs freetime (excluding sleep, of course), which I believe causes people to throw up the work / life boundary walls.

For me, when I was working 20-30 hours / week freelancing, things seemed to invert a bit -- my freetime now dwarfed my work, and I no longer felt that I wasn't taking advantage of my free time if I was thinking about work.

Also, how long do your engineers spend on non-work activities during their 8+ hour work day (including lunch and breaks)?

Edit: missing word