I didn't intend to tap-dance around your question. I'm detecting some underlying motive behind your question, though. Apparently you believe that God gave us free-will under the condition that he knew some of us would fail in its application. That is an interesting point to bring up and I think I can interpret this.
By being human, we are all naturally imperfect. We live in a physical world with material desires and unbridled obsessions. However, we have the capacity to learn and grow wiser as we age. God understands this and has given us the capacity to repent for our sins. Even after committing them, we are still allowed to receive forgiveness from him.
Debating and discussing God's motives for creating a physical world with people is beyond the scope of my knowledge. Obviously we are talking about a being that is well beyond my or anyone else's wisdom. He is an omnipotent force / being. Despite this great chasm in knowledge and wisdom between God and us, he is still understanding of our problems, needs, desires, passions, etc -- and still cares.
Unfortunately, a lot of dogma is generated by religious organization leading to the injection of their interpretation of the scriptures. Again, the only relationship anyone needs with god is an internal one and not one that is ordained by the religious institutions.
So to get back to your question, it is not so much that God is testing us, but rather that he has unconditional love for us, yet cannot look upon sin.
Just translate this into something more local to your perspective. Your father probably would love you no matter what you have done in life. Your father would be greatly disappointed in you if you choose to exercise your free-will in such a way as to cause him pain. Through his love for you, do you feel your father is testing you when he told you as a child not to run across the street or stick your finger in electric sockets? These were his commandments to you as a child and these were meant for your protection.
Have you ever been to a prison before? Have you ever been next to another man so consumed with his sins, that you could feel the aura of evil and hatred radiating from his being? Do you know how isolated and alone someone feels living in that sort of darkness?
I personally believe that since God is purely good, that he cannot look upon sin due to the nature of darkness that surrounds sin. His commandments, in my opinion, are not unlike those of your parents which were meant to protect you as a child. His commandments are there to protect you throughout your life, since no matter how old or wise we all get in life, we are still child-like in the eyes of God.