I would give a badly written query and ask them how they would go about performance tuning it.
I would ask about set theory. If you don't understand operating in sets, you can't effectively query a relational database.
I would give them some cursor examples and ask how they would rewrite them to make them set-based.
If the job involved imports and exports I would ask questions about SSIS (or other tools involved in doing this used by other datbases). If it involved writing reports, I would want to know that they understand aggregates and grouping (As well as Crystal Reports or SSRS or whatever ereporting tool you use).
I would ask the difference in results between these three queries:
select a.field1
, a.field2
, b.field3
from table1 a
join table2 b
on a.id = b.id
where a.field5 = 'test'
and b.field3 = 1
select a.field1
, a.field2
, b.field3
from table1 a
left join table2 b
on a.id = b.id
where a.field5 = 'test'
and b.field3 = 1
select a.field1
, a.field2
, b.field3
from table1 a
left join table2 b
on a.id = b.id and b.field3 = 1
where a.field5 = 'test'
