I like to think if I find myself in this position (with the benefit of thinking through it ahead of time thanks to you sharing your experience) that I would ask the subordinate how they might approach the challenge, give them any thought on how I might do it differently, ask them about their tools/menus (customization or lack there of) tell them how long I think it should take, and say I’ll be back later to check their progress and help them through any challenges they might come across. Then ask the hiring manager or whomever I am interviewing with what is next on the agenda.
I think you did the right thing, I’d like to hear more about the experience and any fall out that ensued.