Einstein didn't say that .The original quote is not implying being "open minded " and "thinking outside the box " , which anyone with limited knowledge and intelligence is capable of , he was suggesting it was simply and importantly "a real factor in research " I doubt he even used the term intelligence . Such a stark telling reply to an accusation of being arrogant and patronising at least provides a laugh .

My guess is that what he meant by that is that imagination was useful in formulating hypotheses, don't you?

I doubt he would have thought hypotheses are much use in science (or archaeology) unless tested.

We can all hypothesize but unless we are prepared to put forward evidence people are entitled to see it as just a bit of imagination, no better or worse than a thousand other theories, don't you think?