I could not agree more. I think initial product was developed with focus on Indian IT market where filtering right candidates is big pain. Hereafter whatever I am saying applies to India. In India For 10 jobs you might get 1000-2000 applications, and you can not interview them all, scanning all those CVs is just impossible. This kind of system can work when you are dealing with large number of raw talent. But then chances are majority of candidates are just good for solving puzzles as they prepare months and months just solving sample puzzles. Plus so many exploitable loopholes as you suggested. Regarding complementary businesses, that's already there. As matter of fact there are large number of institutes to help anyone to crack each and every aspect of IT job interview.
End results, I often meet people with 5-10 years of experience who can not write a functional block of code without ctrl-c+v which makes me feel sad.