The fine line between an interview question and free consulting

Absolutely LOVED this article by Liz Ryan in Forbes. I too have been put in the ridiculous situation of being asked to do specific strategy work in the context of a job interview. Luckily, I've never been desperate for a job when it happened. Probing questions that help a hiring manager determine if I have a solid grasp of some part of the job she expects me to perform make sense. Asking me to invest my time to formulate a strategy for your current situation in anything but the most general terms is not OK. Lest I belabor what I consider fairly obvious point:

1. If you're hiring: Using a job interview as an excuse to get free consulting from a candidate is simply not ethical behavior. There are plenty of ways to validate that someone knows their stuff without asking them for a free lunch.
2. If you're being interviewed: I realize how much stress a job search creates for a candidate, especially when you really need the work. However, resist the urge to give away your hard-won knowledge and creativity to someone who has essentially no skin in the game. An ethical organization and hiring manager will have better sense than to expect this.

I think there are more tactful ways to handle the situation described in the article (I assume the "victim" was convinced this guy was ONLY trying to pry knowledge out of her). For example, I was asked to develop a strategy for an online travel company thinking about expanding into business travel. I told the hiring manager that I was more than happy to discuss key factors that might increase their chances of success but that I simply wasn't willing to develop a strategy for him. I didn't get a call back and felt great about it. I didn't think I'd been rude in the least and managed to send him a clear signal that what he was asking for was unreasonable.

BTW, my opinion changes a bit for second-round interviews. If you're convinced you'be been selected from a broader field, you might consider being a bit more forthcoming. I would still stop short of doing free, strategic work for an organization who has invested little more in you than an interview slot or two.

I realize this is a touchy topic. What are your experiences?