How would you answer your boss?
Imagine the following: you identify a bug in a piece of production code. You go to your boss and present it to them. Your boss asks you what your favorite way to approach this problem would be, and you respond:
"I'm not sure what the word favorite means -- I don't know of an operationalisation of favoriteness in a linearly ordered set with an injective function from the set of approaches -- but here's an approach I like: _____ ..."
Quite frankly, that would be a terrible response. It's very difficult to respond to, fairly blunt, and it doesn't really clear a whole bunch up. It just tells your boss you didn't think the question was well-formed with little attempt to clarify.
Instead, a much more helpful response might be:
"I'm not sure what the word favorite means here -- If we're after the fastest approach to clear the bug, I like approach ______. For optimizing maintainability, we could go with approach ________. Personally, I think approach ______ gives us the best comprimise of the two.
Rather than simply shut down the question by claiming it's poorly formed, this second approach addresses the vague nature of "favorite", but goes a step further to try and get to the core of the question: what approach do you suggest? It's true the question isn't as specific as it could be, but you still understand its general intent (after all, you "gave an expected answer"). There's little merit to making your boss/coworkers jump through hoops to craft a fine and specific question, and doing so to your interviewer will reflect negatively.
That's not to say you should always give the stock answer you think they're looking for. It may very well be intentional that the question is vague; they may be trying to see how you respond to a poorly-formed question. I personally agree that you should challenge that question a little, but you still have to make an attempt at it instead of rejecting it out of hand. For example, I might answer with:
Well that depends on what you mean by favorite. The Big Lebowski makes me laugh the hardest, but on the other hand, Shindler's List probably moves me the most. If you mean the movie I'm most willing to watch at any moment though, it's got to be LotR: The Fellowship of the Ring.
This addresses that you think the question is imprecise, but it also still acknowledges the core question: what movie do you like the most. You've laid out your thought process and reason behind each suggestion, covering a good number of bases, and left room for your interviewer to provide a little more clarification if need be.
Regarding your edit: You can still easily keep in line with your humor approach (if it feels appropriate) after offering an initial response, I would just focus the humor on your answer rather than a potential flaw in the question. For example, in a banking interview, you could follow up the given example with (disclaimer, I am not a banker):
I find it has the smallest diminishing returns on rewatchability, thereby maximizing marginal utility per view in the general case.
I would just be sure to present it in such a way that it's clear you're joking.