There is couple of issues in the Test. For
[ExpectedException(typeof(XmlException))]
[ExpectedException(typeof(XmlSchemaException))]
In your test name provide exactly what you expecting. For example
public void InvalidXmlSchema_EventHandlerExecutes_ThrowsXmlSchemaException()
You also don't need try{} catch{} blocks. The correct exception type would propagate and handled by the ExpectedException Attr.
Keep in mind that since you are the file system to read the wrongXSDFile.xsd this is not a Unit Test. This is an integration test. The test would throw an XmlSchemaException. Below is test would pass for invalid XSD.
[TestMethod]
[ExpectedException(typeof(XmlSchemaException))]
public void InvalidXmlSchema_EventHandlerExecutes_ThrowsXmlSchemaException() {
string xSDFilePath = @"XML Test Files\wrongXSDFile.xsd";
XmlSchema.Read(new StreamReader(xSDFilePath), XMLValidationEventHandler);
}
private void XMLValidationEventHandler(object sender, ValidationEventArgs e){
throw e.Exception;
}