First, I have a family now, and spending time with them is more important to me than any job. (And any company that has a problem with this is not a good fit.)
Second, I've been lucky enough to find jobs that are interesting and intellectually stimulating. My first programming jobs were kinda boring, so I had extra creative energy and learning and building things was an outlet.
Third, owning a home always involves upkeep and fixit projects. These can be fun and are generally easier get my kids to involved in than teaching them to program (going back to #1).
I'm in the office 40-45 hours a week typically, I spend 20-30% of my time just thinking about the problems I am solving, or stuff like this, or following github projects, or other technology reading. I probably do about 4-5 hours of actual programming a day at work. My output during that time tends to match or exceed most of my peers in both quality and quantity.
The problem is getting people to understand more hours isn't the same as more productive output. Spending a couple hours thinking through a problem (or even prototyping) will usually save you more time down the road. This is true from simple data modeling to working through how to fit a system together.
As to the original question.. it is far from the only indicator of a person's own skill and drive, but it is an indicator. Especially in more junior level candidates. There's also the fact that the technology in use changes rapidly... and do you take the time to learn it... either out of your in-office day, or outside.
So I'm not sure why the person without personal projects needs to demonstrate that they're keeping tabs on the industry any more than someone who does.
Seems like you want to ensure X by testing for Y and mistaking correlation with causation.
I disagree. If passion is an important quality to you, then, as the interviewer, you need to ask questions that reveal whether or not the candidate has that quality. It's absurd to ask about personal projects as a proxy for asking "are you passionate about programming" and then to expect the candidate to guess your true intentions and answer accordingly.