They produce more false negatives than false positives. If you aren't in a hurry to grow, thats a good thing. Even "cheating" (memorizing the techniques) to the point of being able to solve a problem on site (which is part of the interview) is not trivial.
Like you said, these problems filter out the people who would be great for getting stuff done and helping you build your software quickly (i.e. more practical people who find these problems a bother). But perhaps you don't always want that kind of person.
Personally, I find these problems interesting but the one I liked the most was the instant search because it had an element of user interaction rather than mere algorithmic problem solving, so I guess I might be the one filtered out :)
I solved the Instant Search problem when I was applying there for an internship. The puzzles aren't required for internships, but I figured it could only help, and I landed the internship. Was a great experience!
For my solution, I tried both tries and hash tables, and I found them to perform at more or less the same level. I later experimented with suffix trees, which I think is probably the best way to go for that problem.
