I think you're absolutely correct regarding "homework." It can be a good indicator of a candidate's competency, but many people don't have the patience to do it.

I spent much of this past fall interviewing for an internship for the upcoming summer. It's one thing for a company to ask a candidate to devote a day to interviews, after flying them out and putting them up in a nice hotel, but it feels completely different to have the candidate complete some sort of homework.

The candidates that you want to hire are likely busy interviewing with several other companies as well, and probably don't have time to work on some random assignment for your company. So, unless your company really stands out, they're just going to pass.

I've found that interviews benefit both the company and the candidate, while I can only really imagine homework benefiting the company. I learn a lot about a company from the way they interview and the way developers talk about their jobs; the interaction is really important. Yet, homework assignments don't really have much interaction, and end up being a test of how much the candidate wants the job, instead of how well they fit with the job.