I've found that the ability to receive and act on guidance with a certain degree of humility is a much better signal of someone's potential than how many algorithms they've memorised.
It takes a lot of practice to know what level of assistance to provide at what time. A coworker once showed me a technique of keeping a google doc with the problems, as well as a step-by-step of the solution and the times at which they should be at that step. It always seemed to work out well for the candidates, as even a poor candidate would finish the problem at like 55 minutes into a 60 min interview.
Even with that, getting a person to see what they should be doing next, without telling them explicitly, is definitely a skill you develop with practice. I think you're right in erring on the side of too much assistance. You get to see much more of how the candidate works if you can skip over the part where they are getting stuck on something.
Actually being able to take a hint and work with the interviewer is a strong signal that a candidate, while maybe not the best for the job, has growth potential.