Correct sir. I tried two of those silvery bags (one from a HD, the other from some RAM), and both were useless defending against the smart key magic. A thin wrap of tin foil, however, completely foiled the smart key so to speak. Victory!
The Gen III uses an internal cut key, also sometimes called a laser cut key. It takes a special key cutter to make them, but most good locksmiths should have them. Tom
A Lexus non-transponder key blank is the closest one to the keyfob stubby. It has the groove down the middle like the Gen3 Prius key. But the Prius key has cuts at the edges, and the Lexus does not. The end treatment is also different. I doubt that the hole in the Prius key is necessary for the lock (it's used to latch the key into the keyfob). So the game is to find a locksmith who can 1) cut the internal groove pattern, 2) cut the shoulder grooves, and 3) cut the end. Good luck. I've been to 5 locksmiths with replies ranging from "don't have the equipment" to accusing me of doing something illegal. If the blank isn't exactly the same as the original, most locksmiths go into freek out mode. I've been trying to get a Lexus CT200h key pattern cut on a Prius Gen3 stubby key. The electronics part works fine, but getting a locksmith to cut the key has proved impossible. I'm fiddling with a diy milling machine to try and cut one myself.