The question is, however, whether this is a good proxy for one's future colleague and employee.
I have no idea what could be a better option (well, maybe preparing some small feature to work on together), but it often turns out that good problem solvers are not really great at doing the job, for reasons that have nothing to do with the hard skills.
Totally valid critique.
Hiring is really hard. You only get a few hours to decide whether someone will be a good engineer and colleague for several years.
By the nature of the constraints alone, anything you do will be extrapolation, and a guesstimate at best.