Hey Ed! There's a big difference between the company legitimately expecting the assignment to take 3 hours and you stating it will take much longer than that -- "to assess your time management skills."
The former represents an awful place to work, while the latter might be fine, just based on the honesty factor.
I still recommend that an engineer set up the project for "professional development" -- I have yet to receive a take-home assignment that was ready to work in terms of infrastructure (Prettier, ESLint, Jest / React Testing Library, and latest package versions all installed).
Just getting a project to the point that it's "ready to work" typically takes 3 or more hours of package installation, updates, and configuration... So it seems reasonable to make the creator of the take-home at the company do that stuff rather than expecting every candidate to do those tasks on their own.