Our farmers markets are awesome for baked goods, I have sold out every single time, no matter how many I seem to take. I do cupcakes, the ones that do actual cakes don't get as much business.
There are 3 different markets in my county, and even the tiny one does great.
The coordinators are the people you want to be asking about how much to bring, they should be able to give you a rough estimate of attendance.
For set up, the simpler the better, I just have a table with a row of small covered stands, and each flavour of cupcake that I am selling is in one.
Then I have wire shelves with all the cupcakes pre-boxed, in singles, packs of 6 and packs of 12.
I have a vinyl banner that hangs of the front of the table, and my business cards out front.
As well as another banner that simply says 'cupcakes' on the canopy.
If you're doing cakes, I would do samples, (just check with the coordinators to see if that's allowed).