If you want to format the TOC line you have to use command=... together with
alternative=command.
\define[3]\ChapterNumber{\line{Chapter #1: #2\hfill#3}}
\setuplist
[section]
[alternative=command,
command=\ChapterNumber]
\starttext
\completecontent
\startsection[title={blabla}]
I don’t know if I use it wrongly, or it’s a bug in ConTeXt, but use \setuplist
with numbercommand renders wrongly
% this is not working, ``chapter’’ and chapter name overlapped
\define[2]\ChapterNumber{chapter #1: #2}
% have to add extra spaces here to avoid overlapping
%
