If that's how you want to test potential engineers, I don't necessarily see a problem with the task itself. Just pay them! I'm sure Uber can find the budget for that.
Snark aside, it can iffy to pay someone for a task at your company when they are still under contract in their previous job. In that sense, while your point is sensible, it can be difficult to go that route from the candidate side.
If you want to limit your pool of potential hires to rock stars who don't have jobs (pool size of approx. zero) this is a great approach.
I doubt they had the budget for that or they likely wouldn't have been essentially trying to get someone to making their MVP under the guise of a new hire interview.
Keep in mind the OP mentioned that this was pre-launch, when they were still UberCab and only had aspirations to be a peer-to-peer cab app. Long before they started marketing themselves as a logistics juggernaut or world changing self driving car creators for valuation justification purposes.