It is said God is all knowing. Which would mean he knew Lucifer would betray him and also knew Adam and Eve would sin. So is God truly all knowing and as such deliberately set up Adam and Eve to fail? Or is God not all knowing? With that said If God did know Adam and Eve would fail, and he set them up as such, can he truly be considered all loving? And finally, if God is all knowing, do we as humans truly have free will?
These are all excellent questions. I can't promise that I will answer them all in the order you have given, but I hope to hit each point. Alright, let's jump in. First of all, and I know you did not specifically ask this, but it is implied by your question--God did not create sin/evil. The Bible is clear that everything He created was good. However, He did create the potential for sin by creating creatures with moral freedom (which is good). Granted, God knew that they would abuse that freedom, reject Him, and disobey His commands. But that does not change the fact that everything He created was good, or that they were truly free. Knowing what free creatures will do in the future is not the same as determining what they do. I take it that is what you mean by "deliberately" setting someone up--making it fall out a certain way so that there are no other options. It may seem to us that if God knows what I will do at 4pm today, then I really don't have a choice to do otherwise. That is not the case. I have the freedom to do otherwise, but if I choose to do otherwise, God would have known that as well. In that sense, the freedom that I lack is the freedom to do something that God doesn't know. That only makes sense if He is all knowing. But there is no necessary causal connection between His knowing what I will do and my doing it. It is really not so different from knowing what happened in the past, except that God can see both directions on the timeline. Just because I know what my wife did yesterday at 4pm doesn't mean that I caused it. Neither does God's knowledge of what will happen in the future determine the future.
Now, don't misunderstand that analogy. In my view, it isn't as if a timeline exists somewhere co-eternally with God and He just looks down and sees what particular points on the timeline look like. That is not my understanding. In my understanding, His divine omniscience gives Him knowledge of what would result from any possible circumstances; therefore, He knows what will occur in all actual circumstances. And He knows this without having to sit around and put all of the pieces together like you or I might. He simply knows exactly what the timeline will look like at any point, even before that moment has come to pass. I will admit that I not an expert on the theory of time, but that is my understanding. At any rate, my point is that knowing what free creatures will do is not the same as determining what they do. In fact, it would be a logical contradiction to say that the actions of free creatures are determined. If they are free, they are not determined. Of course, God could have simply programmed them so that they would not have sinned, but then He would have done away with their freedom. In doing so, He would have made it impossible for them to love Him, and that would have defeated the whole purpose for which He created them--to enter into a love relationship with Him (I wrote at length about this in another article called "Did God create us to be His slaves forever?). God clearly judged that it was better to create a world in which human beings would freely choose to reject Him than to create some other world (a world of automatons, a world of only inanimate objects, no world at all etc).
That brings me to the question, "If God deliberately set them up, can He truly be considered all loving?" I have already demonstrated why I don't think it is right to say "God deliberately set them up." But just one other thought about that in case you were thinking this way. One of my students once asked me, "If God wasn't setting them up, why did He put the tree there for them to be tempted by? Couldn't He have just snuffed Lucifer out of existence and then skipped the whole tree idea?" My response to that is simple. The tree is not the issue. Lucifer is not the issue. They could have sinned without the tree or the devil. Lucifer did not have a tree or anyone else tempting him, but he rejected God just the game. Adam and Eve faced the same temptation--will I obey God or do I want to be God? Consequently, that is the same temptation we all face all the time. Anyway, back to the question: "Is God all loving?" The Cross of Christ answers the question with an emphatic "Yes." My question in response to anyone who would insist that God is not loving is: then what was Jesus--the one who spoke and the universe came into being--doing hanging on a Roman crucifix? The Bible makes it clear that God didn't come up with a "plan B" after Adam and Eve sinned. He didn't have to scramble around and find the duct tape. On the contrary, before He created anything, God knew that human beings would reject Him, but He loved them so much that He established a plan to save them and bring them back into relationship with Himself. To all who trust in the finished work of Christ--His perfect righteousness, death, and resurrection--God gives the right to be called children of God; to be in Christ; to reign with Him forever. God is all good, all loving, and we have genuine moral freedom.