That's not what the Polish sentence says, and I believe that's not what "would have to" means.
The Polish sentence is something like this: "Come on, you really want to invite your mother? We would have to make lunch, we would have to clean the house... I don't want to do this all!"
Sorry, but they don't mean the same. "We should make lunch" simply expresses a mild obligation, and has no suggestion of condition.
Duo's sentence expresses the result of an unstated condition, for example:
"If they let the kids out of school early, we would have to make lunch"
I don't see why it would be wrong, it's conditional and refers to some (potential) future.
"Kate wants to come on Sunday? Come on, I don't want her here! We would have to clean the house, we would have to make lunch... That's too tiring!"
Now I guess that maybe you just referred to "would've". Well, such contractions are accepted automatically, there's really no way to block them...
I'm not sure if the problem still exists, I don't recall hearing about it for quite some time. But in general the issue was that some contractions that are perfectly correct and natural in many contexts were also automatically accepted in contexts where they're either strange or even plain wrong.
I think it may have been fixed by the 'only show the best translation as the correction' rule. This way no such strange answer is presented to the learner, even if it would be accepted if the learner tried it.
"obiad" means both, depending on which variety of English you use.
śniadanie/obiad/kolacja is either breakfast/lunch/dinner or breakfast/dinner/supper.
Polish people usually know the second version, we use the first one here because it's more American and Duolingo is an American company.
All those versions work, you may answer "dinner".