I’ve run a program like this. My answers to your objections are:
You don’t run it for everyone, just people who seem good enough and are willing to do it. A resume filter and a 30-minute conversation are usually enough.
You stop as soon as you’ve got your hire. If you’re bad at picking people for the screen, you learn the signals quickly because of your level of investment.
It does replace a longer traditional interview loop. You hardly talk to them up front. You tell the candidate you will extend an offer right after the work phase.
Another objection is not everyone can afford to spend that time with you. That’s true. We would pay them, and still got some refusals. You have to accept that every interview style works better for some candidates than others. You’ll also find candidates who love it.
This is my preferred proposal to new contacts as well (I set it up as a contract so there's a little less red tape, but even people that pursue me for traditional employment afterword usually land on an extended contract).
Two things it solves: You get to evaluate me, my ability to deliver, and how I interact with your team and I either bring real value within two weeks, or I don't. I can tell you verbally I am an indispensable asset or I can show you; other people have ruined the verbal trust layer which is why this whole debacle exists in the first place btw.
And more importantly, but less communicated, I get to evaluate you. How your team works, the level of talent present, management's ability to keep direction, and wether I genuinely enjoy what you have for me to work on.