I have been pretty close with this girl for a while, flirting and carrying onnnn. We have mainly kept it to a non-relationship thing, as in friends but more, if you get what i mean.

Anyway i was txt her one night when she said
Me- "Sorry for late reply, did i not give you a chance to call me or are you still waiting to use your one call ?"
HB- "Sorry too late =p. My cousins friend is hitting on me. Im scared now =S"
Me- "Haha poor fella, just make sure you dont drink too much okay cutie"
HB- "Look who is being all protective now."

Shit test or something else oO, i wouldnt mind going further then just fooling around with this girl, but i think that i might be revealing that to her and as a consequence she is losing interest.

You're not revealing that you want want to fool around, you're revealing that you're being protective just like she said. You should act like you don't care if someone is hitting on her (which you shouldn't if you haven't even began anything with this girl) because the reason she told you she was "scared" is a test.

After she said someone is hitting on her I would've texted back something along the lines of:

"You should get his number, maybe he's just like your cousin!"

Thanks mate, i can see where i went wrong now and it all seems so obvious ha....