What did Mr. Squire mean when he said to Mr. Sawyer, “is that pony made of flesh and blood?

I think this is speaking of the high temperament of the pony: it's spiritedness.

Sawyer," he cried in a stern voice, "is that pony made of flesh and blood?" "Flesh and blood and temper," he said; "he's too fond of his own will, and that won't suit me."