So if only 10 students are on this committee[1], that makes more sense. Either this has changed since the time of the author's story, or he misremembered, or exaggerated (re: saying that all 25 students, the whole student body at the time, was at his interview plus talking about his essays for days leading up to his interview). I understand that the idea isn't meant to scale up to larger schools, but it sounded like it wouldn't even scale to the number of applications that Deep Springs would get in any given year.
I imagine his recollection is correct; there could have been a policy at the time that required all students to participate in the interview; in that case, they would have all reviewed every essay and discussed them beforehand to develop questions.
I agree with the other commenter here that the students probably didn't think, "this 18 y/o applicant's theories are ground breaking!!!" They probably thought, "what a crazy (but well written) essay, we gotta talk to this guy." Not clear to me if that essay was also the Jungian essay he talks about in the interview, but that gives a good indication of how students tend to approach interview questions about essays and following up on responses.
But yes, the current set up has just over a third of the student body serving on the application committee and only the application committee interviews the applicants. The student body still collectively interviews any long-term staff and faculty; one of the highlights of my time at deep springs (even if it was before I began).
[1] Is this still 1/3 to 1/2 of the student body?