Fitting 1000 short rows in memory is something I'd expect anyone to know off the top of their head just works. It really depends on the specifics of the question and the seniority of the role...
If the interviewee has never worked with a database which would fit in the memory of the machine, and if the company only deals with such databases, then it is clear that it was not a good fit. Failing the interview does not mean that the interviewee is bad, just that they don't know how to count that low, and thus were not the person for the job.
Why? That's not clear at all to me. Most of the job is the same, and the parts that are different are themselves mostly removing steps that aren't needed at a smaller scale.