Literacy, what literacy?
All tests suffer from this to some extent but on-line testing is worse I think - you are testing both the students literacy/ready/writing comprehension AND their ability to understand and communicate with a touch screen/keyboard etc. The testing process adds an additional factor that is not usually well represented in the study process.
The biggest problem that I had in school was that when I read the questions for most non-science based exams, I found it hard to figure out what/which answers they wanted - my academic history is full of D grades followed by A grades on the re-test.