Ugh, this is acceptable, I guess, provided the company is willing to pay an hourly wage. I'm currently in the process of looking for a new gig, and there's nothing worse than being sent a coding challenge that should take about '2 hours' (4-5, more like), and then to get a canned rejection from the recruiter stating the code didn't pass muster. This is especially annoying with companies with DEEP pockets - at least do me the courtesy of paying an hourly wage OR have an engineer on the team go over the code and give some feedback.

No candidate that you would actually want to hire would jump through this hoop. Not even ones presently unemployed.

You'd pay them. You'd take something small that needs doing, outlay a much larger than usual slice of money to it and hand it out to all of the last line of candidates.