"People who have a master’s degree in CS but seemingly can’t code their way out of a paper bag probably actually aren’t bad; more likely they had an education which de-emphasized practical hands-on programming in favor of heavy theory. People who post “please give me the code” questions on mailing lists and forums probably actually aren’t bad; more likely they had an education which was based around memorizing and regurgitating stock answers to stock questions."
What does this even mean? When someone lacks a certain skill, they aren't "bad" in some objective sense, they are misqualified for the job. If someone can't code their way out of a paper bag, should we be hiring them anyway for a programming position because they're not "bad"? What's the point of the interview in the first place? I don't understand the argument.
To the other points, I completely agree there are many ways to screw up interviews and few ways to get them right. I'm still a believer that an interviewer who administers a coding question, one that is reasonably realistic, in both form and the environment the candidate has (ie they have their own laptop) can be a good way to assess someone's skills if you are doing it right. You let them work, let it be a humane environment, and don't get too hung up on the details. Usually if someone can hack it bleeds through pretty clearly, even if they don't get to the exact solution you wanted. (And of course, this is just one data point, that should be distilled into a larger picture of the person's history, accomplishments, etc.)