Using the bitcoind -testnet test network and automatically creating test wallets
Each instance of bitcoind running with the testnet option creates its own wallet.  You cannot spoof wallet balances, but you can mine coins on testnet with minimal hardware as the difficulty resets to zero (or 1) on a regular basis.  You can also get testnet coins from faucets online.  You create payments and addresses on testnet the very same way you would with the non-testnet version of bitcoin (either via the JSON RPC interface or CLI commands).  Also blockexplorer for testnet is located here http://blockexplorer.com/testnet