You have a typo in the first code example [...]

I have this:

$mockReturn = array();
$mockReturn['request'] = '/account/verify_credentials.xml';
$mockReturn['error'] = 'Could not authenticate you.';

$stub = $this->getMock('Zend_Service_Twitter', array('verifyCredentials'),array(),'',FALSE);

 $stub->expects($this->once())
              ->method('verifyCredentials')
              ->will($this->returnValue($mockReturn));

$model = new Twitter_Model_Twitter(array('username'=>'test','password'=>'passwd'));
$model->setOptions(array('twitter'=>$stub));

$posts = $model->verifyCredentials();
$this->assertEquals($posts, $mockReturn);

I am confused because it is trying to access the twitter.com API. I know this because when I turned off my internet connection, I got this:

1) testVerifyCredentials(Model_TwitterTest)
Zend_Http_Client_Adapter_Exception: Unable to Connect to tcp://twitter.com:80. Error #60: Operation timed out

FYI: when it connects successfully to the twitter API i get this:

1) testVerifyCredentials(Model_TwitterTest)
Failed asserting that two objects are equal.
--- Expected
+++ Actual
@@ -1,9 +1,5 @@
-Zend_Rest_Client_Result Object
+Array
 (
-    [_sxml:protected] => SimpleXMLElement Object
-        (
-            [request] => /statuses/friends.xml
-            [error] => This method requires authentication.
-        )
-
+    [request] => /account/verify_credentials.xml
+    [error] => Could not authenticate you.
 )

/htdocs/twitter/tests/application/models/TwitterTest.php:57

How do I properly test Zend_Service_Twitter? When my Twitter_Model_Twitter looks like this:

Also I'd have a close look at what exactly you are doing in $model->setOptions. Refer to the code above, there it's called $model->setProperty. Does this successfully alter the property? Again a var_dump before and after the replacement will probably show this.

If this part works, you'll probably have to check whether you overwrite the 'twitter' property later on.

Finally I'd recommend you an HTTP tracker like HTTPScoop to see what requests your machine does to the outside. It helps to have a close eye on the HTTP traffic when working with web services.

Good luck!