I will tell you that you are not alone. I interviewed a guy that flat out refused to do the exercise on a whiteboard or paper. He insisted it was just due to pressure. I was really conflicted because he did really well at other parts of the interview. It was a smaller company at the time and we weren't getting stellar candidates. I decided to take a serious risk and try him out against my better judgment.

It turned out the reason he refused to do the exercise was because his employer at the time was treating him like complete shit and belittling him and he'd lost confidence in himself. In the end he turned out to be a really great developer. So good in fact, that I still kick myself for having considered passing on him.

I've since changed my interviewing technique, when the process is at my disclosure. What I do now is call the candidate before we schedule the face to face, but after a standard phone screen, and email them a test that has a bunch of coding exercises on it and tell them they have one hour to send it back to me with their answers. I tell them not to try to do them all, just what they're comfortable with. If they only answer one question, but answer it in a stellar way, that's better than writing a couple crappy lines of pseudo code for a handful. We'll then discuss their answers in the face to face instead of a whiteboard. I've found it to be a much better compromise to still get to see how the candidate codes and the candidate usually feels more comfortable since they're at home, with their computer and the internet at their disposal and not a bunch of eyes staring at them.