This question is a good interview question because it invites discussion on several levels. At one level, it is a programming question, to see if you know how to efficiently scan a corpus of English text to count the occurrance of words. A person with a good CS education and a couple years experience will probably tackle it as a programming question. It is also a question about defining the problem domain.
A person with more experience may also know that English is a moving target and that where you get your corpus of english words will make a difference.
An even more sophisticated user may have some notion that the 10k most frequently used words will be virtually independent of the corpus, unless you make a huge mistake like using Shakespeare or a medical dictionary as your corpus. They may want to know how they are to distinguish proper names from other words. There are some real subtlties here.
If the company is in the business of analyzing english text, this question sorts out candidates by skill level. It's a check on the claims they make in their resume.
You mustn't get in a huff because the question is ill-defined. Of course it's ill-defined. One purpose in asking the question is to see if you recognize issues in the definition. But don't focus too intensely on that part of the question either. It may be that the interviewer really intends to talk about your programming smarts, and is himself not very sophisticated. After a little preliminary conversation, ask the interviewer, "Do you want me to talk about programming issues or about the domain of analyzing english text?" If you want to score full marks on this question, you need to answer the question the interviewer intends to ask. The interviewer might not even have a completely formed idea of what he wants to hear.
In my recent experience interviewing, most interviewers ask coding questions. Coding is simple and well defined. The interviewer doesn't have to think too hard to ask you a coding question. He has years of experience reading and writing code, and lots of time to look for bugs while you fumble at the whiteboard.