Having only seen the candidate's paraphrase of that conversation (and never having worked for or interviewed with Google), I would STILL be inclined to give that candidate a thumbs down.

To solve difficult technical discussions, it's important to be able to restate the other side's arguments in the light most favorable to THEM, while the candidate was entirely focused on paraphrasing the interviewer's argument in the least sympathetic way. Would you want to work with a person like that?