Hi Spark
![:)](http://public.gamedev.net/public/style_emoticons/<#EMO_DIR#>/smile.gif)
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My story is somewhat similar to yours. I have a degree in Computer Science and worked in defense contracting for two years after I graduated. When I was 25 I started looking for a job in games and have been happily employed as an engineer for about 3 years now (I'm 28).
So you are definitely not too old. If you're failing the technical tests, then the number one thing you need to be doing right now is making games. Especially if you haven't touched any programming for a few years. Design a simple game and make it. Don't shoot too high, the important thing is to finish it, so I'd go for maybe 3-4 months tops. Make a schedule, get it done. Then do another.
You'll be surprised how much this will teach you. You'll run into problems you never would have thought of. You will bang your head against the wall. You will discover all kinds of cool tricks and ways to make the code easier to work with. You'll probably make a few decisions early on that will come back to bite you hard later on, but you'll never do them again. And most importantly you'll be learning. Every mistake, every thing that works right, these are all things that you will be able to talk intelligently about at an interview, to offer small insights on and show the company that you have something to provide.
Also, read. Specifically read books and articles on good code design. Try to get a feel for what is maintainable, and what isn't. Don't go nuts with specific design methodologies, these are often more academic than useful, but at least be familiar with them. Try to think as you code "if I were somebody else, would I have any idea what this code does?". It's very important in games that you be able to write clear and concise code that others will be able to work with. There is often little to no documentation outside of the code itself, and every minute somebody spends trying to figure out what your spaghetti logic is doing is one minute closer to missing your ship date.
It might take a year and 2-3 small games to be truly ready, but if you stick with it, have some smarts and work hard you'll be able to land that job.
Good luck!