A decent shop should have their guitars set up properly sure. When I was looking to buy one a while back, the shop that had the one I wanted was a way away but I made the trip to go and see it. Bit like your experience, badly set-up and buzzed like made. When I pointed it out, their response was 'well you can get that fixed once you've bought it'. Yeah right, you want me to pay you for something that isn't right and hope that I can either fix it or pay someone else to do it.
Having said that, the Fender I did buy eventually was really well set-up and played really well.