Updating core with Composer doesn't work
Instead of trying to update Drupal directly with Composer, instead try starting with drupal-composer/drupal-project as a starting point. This project definitely works with Drupal 8.3.0.

Set up a new project with drupal-composer/drupal-project, and use composer require to add any modules you need. Once your code is the same in the new project as the old, you should be able to just copy the database over (or just point to your existing database with settings.php) and run updatedb.