You just gave me a flash of brilliance...
This whole thing is not about prying into the private lives of prospective employees,
it's to see who holds to a contract, their values, & can keep their mouth shut in the face of pressure.
THOSE are the people who get hired because the company knows they won't divulge company secrets.
So when asked to give up your password, say: "No thanks, I want this job. I know that if I show myself to have no regard for the law, contractual obligations, or morals the company wouldn't want to hire me, and by giving my password I'd be doing all 3. Besides, would you want to work with someone who can be pressured to divulge company secrets?"
Though the argument about it being an end run around a company not being allowed to ask certain information is a good one too. "I'll think about letting you look at my account as soon as I've removed all information pertaining to things it's illegal for the company to ask during an interview, such as religion, children, sexuality, etc.."
The ACLU is getting involved, so this practice might be quashed quickly.
They do have their uses.
Basically, why would you give any random stranger (and that's what the interviewer is) access to your private life? Would you hand over a house key & let him/her drop by whenever it's convenient for them, to rummage through your mail, photo albums, bookshelf...?