Has anyone found an answer to this yet? I got my 2020 MBA this week and unfortunately didnt do proper research on using my 2011 iMac as a display for the MBA. Nothing works with TB3 to TB2 adapter and TB2 Cable. I have read that a TB3 port will probably work, but I am unwilling to fork out $200 not knowing if it will work. Apple support has been no help. The TB3 to TB2 clearly states that it will work and is compatible with MBA, disappointed.
As saulinpa said a week ago - you can't use a TB3-to-TB2 adapter unless you're using an actual Thunderbolt monitor. Use any random USB-C-to-whatever-interface adapter you need. If your monitor has DVI, get a USB-C-to-DVI adapter, if your monitor has HDMI, get a USB-C-to-HDMI adapter. If your monitor has Mini DisplayPort, get a USB-C-to-Mini-DisplayPort.
For the people complaining about an iMac in Target Display Mode not working - for *THAT*, you have to use at Thunderbolt 3 to Thunderbolt 2 plugged directly in to the Thunderbolt 2 Mac, then a Thunderbolt 2 cable directly from that to the iMac.
Also note that if you are connecting a Thunderbolt Display (iMac in Target Display Mode or native Thunderbolt,) you are still limited to two displays per Thunderbolt bus. If you're on a MacBook Air, that's two external displays - period. No matter how they're connected.