I wouldn't be able to do this in my own native language (aside from "stone" and "stick", I'm clueless about the tools involved), let alone in a foreign one. I think this is way too specific to be a good test for fluency.
Given your situation, I would just launch into a German explanation complete with the bit where I say I don't know the real German words. Then I will muck about with hand gestures and phrases like "smaller bits of would" etc until they get it.
I would do all of this while screwing up my declensions and conjugations. And I would do most of the screwing up fluently. Less fluently if I notice the error.
This is why there are courses in "business" versions of languages, for example.
So someone can be functionally fluent in the contexts they typically encounter, while being non-fluent outside them. I doubt any native speaker can be fully fluent in all possible contexts.
There's lots of words in my native language of which I know the meaning of, technically, but practically speaking they might as well be Greek to me.
There are all of these types of flowers, trees, countryside-related mechanical terms (my peasant brother knows the names of all the pieces of which his wooden-made carriage is made of, I have no such knowledge) which might as well be from a foreign language to me. They sound right but I don't know exactly what they represent.
I'd say that you can call yourself fluent in a language once you can express feelings like anger, love, nostalgia etc. and can understand and make jokes in said language.
That is a reasonably specific domain of knowledge.
Fluency means that most of the time you understand the conversations around you, about a wide range of topics. You can understand not only the local dialect, but others as well, and communicate effectively. You understand slang. When you don't understand, it is usually just a subject that is new to you or the usage is wrong.
Think about what age people understand children to be fluent in a language. Most folks by 14 or 15 (in English) have enough vocabulary to get by without learning more the rest of their life, but won't know specialty terms such as the one in your firestarting example.
I've not personally reached fluency in my second language, I just can see the goal. My spouse is fluent in English, though, and has a wider English vocabulary than I do. Lots of work on his behalf and years more practice and an interest in archaic terms. He still gets stumped, forgets a word here or there, has an accent, and all that, however, and likely reached complete fluency some time back.
Silicon valley has ruined all these words.
Then again, most people don't have to start fires.
But I also often hear the two-step usage where tinder is includes kindling.
This is why English is a clusterfuck, and makes no sense compared to most languages. Imagine if we called food 'eatings', that'd be weird, eh?
http://www.englishpage.com/gerunds/part_1.htm
Perhaps you are complaining that gerunds (which are already nouns) can grow extra meanings over time. But all languages do this kind of stuff.
German has exactly the "problem" you are talking about, only worse. Depending on capitalisation, "Essen/essen" can be the noun "food" or the the verb "to eat", But when used as verb, it is usally used in the sense of the English gerund "eating".
My language doesn't have a word for "kindling". If you want to translate it, you would use something like "material used to start the fire". So, by you reasoning, for someone from my country to be fluent in English, they also have to know that concept of "kindling" exists and has a name?
Thinking about it, I can't say I disagree. You have to know about the way people reason about stuff, not just words to name them.
I'd say that someone is fluent when he starts thinking in the language and is able to have everyday conversations with other people at normal speed without the native interlocutors feeling that they need to simplify their speech.
I am native speaker/reader/writer fluent in my 2nd language, and I don't know the word for kindling. I am reasonably certain there is one, but would have to look it up, and so would any other native speaker that wasn't a linguist.
In fact, if I did happen to know the word and used it, no native speaker would understand me without an explanation.
The way I (and practically any other native speaker) would describe that portion of the task would be to say something like "use a small amount of paper, twigs, sawdust, dry leaves, or any other easily ignited material as a starter".
I used to get very frustrated at all the English words that didn't have direct equivalents, such that I found the 2nd language rather limiting in it's expressiveness.
In fact, I am pretty sure that the way most native speakers would approach the 'explain how to make fire' task would to say "here, let me show you how to do it."
Example: there exist equivalents to the words shiny, glittery, sparkly and most other common variations on the concept (some translate to the same word), but if you want to express 'pearlescent', the best you could do is 'lustrous like a pearl'.
Worse yet, often if I did find an obscure equivalent word and used it no one else would recognize it, and even if they figure it out from context they would still think I was weird or trying to score points with my vocabulary.
Further, in the 20 years since I actually lived there, using English loan words has become rampant, so much so that by not using them my speech comes across as rather affected, stuffy, and snobbish (eg. the word for upgrade (noun or verb) is for all intents and purposes 'upgrade', even though a perfectly understandable equivalent does actually exist).
In other words I should be able to easily explain anything I can explain in my 1st language whether it's how to drive, how to change a tire, what the parts of a bicycle are (wheels, spokes, chain, gears, handlebars, tire, kick stand, peddles, brakes, )etc. Any native 8 yr old can name all those things.
Similarly describing a car. The stick shift, clutch, odometer, glove compartment, engine, seat belts, arm rest, windshield, wheel well, windshield wipers, reat view mirror, antenna, etc.
Any native speaker will know all those words. I'm still at the "explain with smaller words" phase like "antenna" would be "metal stick that receives radio waves".
I'm not fluent.
My real world rule of thumb is that if I wrote "Fluent in Mandarin" on my CV, but then in the interview I couldn't read or write decent responses to emails or something like that, then most people wouldn't consider that as fluent (despite the dictionary definition).