Am I the only one baffled by the fact that the engineer uses a work PC for a personal job interview assignment?
Absolutely. Yet as a hiring manager, I see it all the time.
I don't even use my home PC for interviews, but instead use a refurbed laptop with a clean OS install.
Probably. I have seen many colleagues across the cubicle aisles spending their time on things completely unrelated to their work. I would be baffled to hear that you have not had similar experiences.