[Jtsummers]

Algorithms knowledge demonstrates competency in the small, but isn't good for demonstrating skill at programming in the large. The person passing such tests will be effective in developing programs, but not systems, and may not be effective in self-directed design of programs that exist within systems.

But the more obscure stuff doesn't demonstrate much, really, except that they know obscure stuff or are good at researching to find solutions. A more effective question might be: develop or use an algorithm (no constraint on performance like here) to solve problem X. Then follow it up with discussions on how their solution performs and see if it can be improved, and how well they handle being directed to a better--more efficient--solution if they didn't pick an optimal one already.

Of course, even that has problems (with the second part having an implicit bit of "culture fit" to it, and depending on the interviewer being a good critiquer and not merely a nitpicker). And it still only reveals the ability to program-in-the-small. So would only be useful for certain roles, or perhaps more widely for entry level employees.