I got asked to do an audition project as part of an interview last year. After completing the phone interview and receiving the project, I determined that this was something that they were having trouble getting ideas for, and were simply using the interview process to jump start it. I declined to participate and told them I would look for work elsewhere.

If the project is a couple hours, then sure, I have no problem with it. When it's an entire real project for the company, you're just donating a week's work to someone in the hope of getting an offer letter.