Three hours would be way too much for me during the daytime. Even a 2-hour movie is sometimes too much. I drink a lot, I have a small bladder, and I have trouble ignoring a need to go. It would *really* distract me if I had to go and wasn't allowed to. I sort of agree about needing to go 5 minutes before the test starts, except that it might really be nerves, or maybe they were afraid to go right before the test started and miss getting into the test classroom, etc. It does sound like cheating is rampant in that school, though, so I can see taking extra precautions. And I agree about international students/recent immigres, that the culture back home is often different in terms of what is considered cheating, plagiarism, etc., and sometimes there's an adjustment period before they figure out what is expected in the new country.
It makes sense to me to not allow students to leave in the last 15 minutes, because students who need most of the time allocated will often be hurrying to finish, possibly going back to problems they skipped before (and thus working on the very problems that are giving them the most trouble), etc., and it's definitely distracting to have other people leaving around you. Not just the noise and commotion, but also the feeling that everybody else is already finished, you're obviously taking too long, etc.