If you can't debug you're pretty much not a programmer at all, let alone a good one.

Debugging is a real, practical application of not only technical skills but also analysis ability and thought processes. As a result I'd rate it as a far more useful and relevant test than whiteboard or interview questions.

Unless the job you've got involves spending all day answering theory questions, you need someone who can apply whatever skills they've got.

What you do need to do though is ask yourself was it a fair test of debugging ability - could they run the code, put in break points and so on in the same way they would in the real world? What sort of error was it? Is it something the compiler would pick up and flag (in which case it's a pretty pointless question as they'd never need to spot it)?

If it was just written on paper then it's basically just a detailed reading test and that's an even more abstract skill than your average technical interview question and I'd argue, pretty much worthless.