All that's true, and sadly it also often doesn't even matter how good you even are either. I have decades of experience and I still get "evaluated" based on how fast I can do silly brain-teaser IQ-test coding challenges.
I've gotten where any company that wants me to do a coding challenge on my own time is an immediate "no thanks" reply from me. Everyone should refuse that. But so many people are so desperate they allow hiring companies to abuse them in that way. I consider it a kind of abuse of power to demand people do like 4 to 6hrs of nonsensical coding just to buy an opportunity for an actual interview.
That error mode (and it is one) doesn't seem so bad, relatively speaking. Personally I find puzzles interesting and while the value is deeply questionable (I mean, how often do you implement binary search or a novel hashing algo at your job?) I actually rather enjoy jumping through those hoops. Far, far worse is just getting ignored entirely. When rejections start looking good, simply because there is some evidence that they actually saw your application, you know things are bad.
For me I would absolutely never want to work for a company (or boss) who asks people to do a coding challenge before the interview, because that's indicative of a kind of leadership and people I simply don't like. So it's a great filter for me. Once they mention a coding challenge, I end it right then and there, and take them off my list of people wasting my time.