What tests and setbacks does Santiago experience on his journey?

I would say that Santiago's first test is getting up the courage to tell his father that he wants to leave and travel the world.  He knows that it will disappoint and perhaps even anger his father, but Santiago still asks.  He even came away with his father's blessing. 

An early setback was when Santiago was robbed.  He had sold his sheep in order to finance his search for his Personal Legend, but soon after...

I would say that Santiago's first test is getting up the courage to tell his father that he wants to leave and travel the world.  He knows that it will disappoint and perhaps even anger his father, but Santiago still asks.  He even came away with his father's blessing. 

An early setback was when Santiago was robbed.  He had sold his sheep in order to finance his search for his Personal Legend, but soon after Santiago was robbed and lost his money.  He recovered by getting a job with a crystal merchant.  Within a year, he and the crystal merchant had become wealthy men.  

Santiago then continued on his quest to find his Personal Legend.  The next setback was learning that he must stay at the oasis, because the caravan refused to continue on to the pyramids.  The caravan would stay put until it was safe to travel again.  Unfortunately the bands of robbers attempt to come into the oasis.  Santiago had a vision that they would attack, so the oasis was able to defend itself.  

That is not the last time that Santiago had to deal with Arab marauders though.  Santiago and the alchemist are both captured at one point.  Santiago was only days away from reaching the pyramids that he had been so desperately seeking.  Santiago once again was forced to give up all of his money.  This time it was to save their lives.  

Later, Santiago was digging for his treasure, and he was again accosted by robbers.  They beat him until they discovered that Santiago had no money. 

I might say that his final setback was discovering that the treasure he so desperately sought was back in his hometown.  That's not a terrible setback though, because he got to go back home and got rich in the process.