The students hated the infinite time ones, because nobody knew how much time other students spent on the test so one felt obliged to spend inordinate amounts of time on it.
Besides, if you couldn't solve the exam problems in 2 hours, you simply didn't know the material.
I went to grad school in CS after a few years of work and when I taught I centered the classes around projects. This was more difficult in lower division classes but very effective in upper. But it is more work on the person running the class.
I don't think there's a clear solution that can be applied to all fields or all classes, but I do think it is important people rethink how to do things.
Ya know, the funny thing about students - if you presume they are honest, they tend to be honest. The students loved it, I loved it. If anyone cheated, the students would turn him in. Nobody ever bragged about cheating, 'cuz they would have been ostracized.
Besides, I actually wanted to learn the stuff.
A similar exam problem in AMA95 was to derive the hyperbolic transforms. The trick there was to know how the Fourier transforms (based on sine/cosine) were derived, and just substitute in sinh/cosh.
If you were a formula plugger or just memorized facts, you'd be dead in the water.
The ASR-33 teletype lasted another year.
I ceased knowing everything about my computer in the late 80s.
I actually loved my classical mechanics class. The professor was really good and in the homeworks he'd come up with creative problems. The hardest part was always starting. Once you could get the right setup then you could churn away like any other (maybe needing to know a few tricks here and there).
Coming over to CS I was a bit surprised how test based things were. I'm still surprised how everyone thinks you can test your program to prove its correctness. Or that people gravely misinterpret the previous sentence as "don't write tests" rather than "tests only say so much"
I think if you look at the 2012 Harvard cheating scandal, it's clear that this isn't true. There, the professor presumed honest students, hundreds cheated, and no student reported.
And I recall a sci-fi short story long ago, technological civilization on a single continent with a permanently clouded sky. They had not figured out they were living on a sphere, they were having trouble with train tracks mysteriously being the wrong distance and train passengers feeling light on the high speed trains. I didn't check the guy's math but it sure seemed right when the answers looked exactly like Einstein's equations even though the units were very different. (Limiting velocity = orbital velocity, the discontinuity being weightlessness.)
One reason it did work is the students liked being trusted, and they did not like anyone that would threaten the system, and would turn them in.
BTW, that was 50 years ago. I have no information on how the honor system is fairing today.