I basically like the approach, but I'm a bit wary after playing devils advocate with it for a moment.

A candidate might reasonably assume that they can look better than the other candidates by spending more time on the problem and tackling a larger or more impressive ticket. If you imagine a world where all interviews were like this, candidates could end up working 60 hours a week on these projects in the normal course of job hunting (easier to imagine if you assume that the talent shortage isn't permanent). Probably, since they can see the size of the contributions made by previous candidates, the pressure increases over time as well.

edit: it would be amazing for FOSS in general though. Imagine how much faster GNOME would be if hiring committees required you to write bug fixes for popular projects.