I think it is correct, current NAUTICAL English. The world of the sea has its own specialized vocabulary. http://tinyurl.com/k7sb4s8 says "set (n) Definition: The direction of current flow; one of the variables employed to calculate a reliable course over the bottom." But in fact I see that m-w.com also has " to have a specified direction in motion : flow, tend <the wind was setting from Pine Hill to the farm — Esther Forbes>" and "direction of flow <the set of the wind>" A famous inspirational poem by Ella Wheeler Wilcox, about determining one's own destiny--written in 1916, so old, but not terribly old--says "One ship sails East, And another West, By the self-same winds that blow, 'Tis the set of the sails And not the gales, That tells the way we go."

I think you've run up against some more archaic language here. Here's a poem from a few centuries ago: When Spring grows old, and sleepy winds Set from the South with odours sweet, I see my love, in green, cool groves, Speed down dusk aisles on shining feet. So I'd forget about this meaning of 'set', if I were you. It is no longer ever used.

No, I wouldn't use it for either of those things. It literally means to become static (i.e. to become incapable of movement). You would still never use this for wind, since the air is always capable of movement, but concrete can "set," a cake can "set," etc. It's also used in several phrasal verbs ("set up," "set in", "set aside," etc.) but I don't think that any of them have the meaning you want.

Brainer, As a native speaker, I wouldn't say either of these sentences. They sound odd to me. The closest I can use "set" with "the wind's direction", would be "The wind will set in from the south." but that still sounds stilted and odd. But why try to say something using a certain word, eh? I'd probably use "The wind comes/blows from the south". That feels pretty normal to me. Charley

Using the word set in this context is correct, however, it is used as a literary conceit usually. Poems, books, etc. In this case, the word "to set" means it has arrived at its intended place or condition. We actually use it in this way a lot more often than we are aware. In this case the wind will be setting or arriving from a particular direction. It is also used in place of the word "settle" which in many contexts has the same meaning, i.e. to cease movement or progress. In the example of the wind, the word set could also correctly apply.