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alarm() is one possible implementation, but Charles-François listed some drawbacks.
You can also use resource.setrlimit(RLIMIT_CPU), but the timeout is the CPU time (e.g. you cannot stop a sleep) and it is not portable (e.g. resource is not available on Windows).
Another possible implementation is a thread. faulthandler uses an "hidden" thread (implemented in C): a thread ignoring all signals using pthread_sigmask. Python threads are not reliable for a timeout because of the GIL, and it is not easy to "interrupt" another thread from the "timeout" thread. For example, you cannot (easily) raise an exception in another thread.
> I'm not sure there's a reliable way to write such a general-purpose
> wrapper
I agree, but it doesn't mean that it is not possible :-)
I think that you should try to implement in C a thread ignoring all signals. It becomes more complex when you have to implement the "interrupt the current thread" (current thread, or maybe the thread using the operation_timeout context manager?) part.
I suppose that you will have to use low-level "tricks" and you will have to experiment your tool on different platform.
You should start this project outside CPython (as a third party module), and then ask for an integration when your work is well tested. You have to know that a module "dies" when it enters CPython: you have to wait something like 18 months to modify it, so you have to be sure that your code is "correct" ;-)