[pmikesell]

You can absolutely fake this. There’s a huge difference between coming up with and implementing something vs understanding it enough to be convincing.

Have you actually tested this out?

[davnicwil]

Yes I've done this both as an interviewer and interviewee, it's a pretty valuable exercise I've found. Not a silver bullet, not the only thing you can do, not appropriate for every situation, but generally good.

Regarding your other point I agree with you, but if the main point is to evaluate understanding then the difference doesn't really matter. If you're testing for ability to invent concepts etc, then this might be more important to you.