The physics of laser-plasma interaction is studied on the Shenguang III prototype laser facility under conditions relevant to inertial confinement fusion designs. A sub-millimeter-size underdense hot plasma is created by ionization of a low-density plastic foam by four high-energy (3.2 kJ) laser beams. An interaction beam is fired with a delay permitting evaluation of the excitation of parametric instabilities at different stages of plasma evolution. Multiple diagnostics are used for plasma characterization, scattered radiation, and accelerated electrons. The experimental results are analyzed with radiation hydrodynamic simulations that take account of foam ionization and homogenization. The measured level of stimulated Raman scattering is almost one order of magnitude larger than that measured in experiments with gasbags and hohlraums on the same installation, possibly because of a greater plasma density. Notable amplification is achieved in high-intensity speckles, indicating the importance of implementing laser temporal smoothing techniques with a large bandwidth for controlling laser propagation and absorption.