This pilot has clearly not understood his responsibility as aircraft commander.
Ahh - but in this situation,
Genghis the Engineer was the aircraft commander. The commander is the person nominated by the owner or owner-authorised operator to be responsible for the safety of the flight. As
Genghis was flying with this candidate in order to assess whether they were safe to operate the aircraft in the future (and until the flight was complete, that assessment isn't complete) then the candidate cannot be the pilot-in-command.
As
Genghis isn't an instructor, the flight isn't
dual, either. As a pilot correctly licensed for the position, and assigned flying duties on the aircraft, but
not in command, the candidate is either a co-pilot or ICUS (in command under supervision), and should log the flight as such.
Genghis - I might suggest you take a little time to write up a one page brief, which can be emailed (or printed and handed to) each candidate, setting forth the legal responsibilities (and the insurance cover), and outlining exactly the command chain and what skills you expect to see for each flight. It removes all grey areas then, and makes it easier for you to say "No" as you can simply point out the bit on the brief they didn't meet.
edit: just read the thread!
Sorry for the repeated info. In terms of command ability, or assessing such - you have run into an authority gradient problem rather than a command problem, I think. Briefing that you are in command, but they are operating the flight should go some way to sorting it. They will still defer to you for the flight, however, and you should expect that.