My employer has sometimes given out challenges that take a few hours. We just ask the candidate when they'd like to do the take-home and email it to them on that schedule. Then they have to submit their solution within the allotted time. It's a nice way to make sure the candidate knows it really only will take a couple hours, because neither side wants the candidate to spend 30 hours on a 3 hour take-home.
I don't doubt that it's quite stressful for some people. In general, I think any element of an interview process is going to be stressful for at least some people, just given the stakes involved. That said, at least this guarantees it's not stressful and a big time sink.
Also, I do think that some people are able to complete it in a third the time, but I think the more useful evidence is that many candidates complete it and do a perfectly good job, some even with a healthy chunk of time to spare. If it were a totally unrealistic time goal I'd expect we'd quickly notice when no one finished.
