This article talks about Chinese people forgetting how to write characters and includes people getting Nick's favourite 打喷嚏 wrong in the video.

http://www.bbc.com/news/world-asia-china-28937570

Here's an episode of Character Hero on Youtube with subtitles - watched a bit and it looks suitably dramatic and emotional:

https://www.youtube.com/watch?v=vxJT3SjS2-s

Thanks, I'll watch it.
I will try never to forget how to write the classic 打喷嚏 haha.

Instead of using the characters 喷 and 嚏, many Chinese dialects use instead an onomatopoeic word to indicate that sneeze action. Many different characters have been used to imitate that sound. The second message in this forum post http://www.ispeakmin.com/bbs/viewthread.php?tid=6802 lists a few variations in some dialects. 临川：打瞎脆 南昌：打瞎秋 长沙：打哈啾 梅县：打哈锤 广州：打嗐嗤 建瓯：[扌百]阿叱. Since a lot of Chinese people don't speak putonghua, it's no wonder that many of them don't know the character 嚏.

Thats true, but supposedly most of them have to learn putonghua in school since 5 years old.

I would be curious to know if this same test (as rigorous as it is) had been administered say in 1984, 1954, and 1924, what would the results have been.
My understanding is that widespread literacy was a relatively recent development in Chinese history.
Furthermore if you had asked a number of people in the United States to spell words such as "receive" or "occurrence" I am sure you would get a number of fails even amongst the well educated.