[kornork]

I can't answer for the parent, but I've done similar style interviews. Because the candidate is not familiar with your codebase, you must be the expert. Your job is to let them drive as much as possible, while you "unstick" them when they trip over what they can't possibly know. It is a collaboration, which is part of what makes this a good interview style IMO. Sometimes a candidate will offer an otherwise good solution, but it won't work well within your codebase -- in this case you explain why, and then you iterate.