Free Will and The Existence of Evil

So in class today, the arguments got heated once again. It started with speculation about free will vs. determinism and somehow ended up in the (possible) existence of God and His supposed nature. So once again I'd like to give my take on the issue and see what y'all think. Although I'd like to start with the nature of God rather than free will.

The basic argument is: assuming God exists and that He is all knowing, all powerful, and all good/perfection, shouldn't His perfection require Him to prohibit the evil that occurs in the world? Or even before that, since He is perfect, how is it that He created beings with a built-in defect, the propensity to do evil?

In my attempt to answer these questions, I'd like to just take a step back and examine the premise itself. God is "perfect" and "good". One of my old religion teachers pointed out that some concepts require an understanding of antitheses. For his example, imagine a world in which all people are the same height. Where would the concept of "tall people" and "short people" be in such a world? In other words, sometimes we need an understanding of two opposites in order to have complete knowledge of the concept.

So if we apply this concept to our original question, maybe God created beings with a propensity to do evil (knowing full well they would do evil acts) in order to exemplify His perfection. If we apply the concept of opposites, it's possible we may never have understood perfect goodness without a knowledge of perfect evil. The problem I see with this argument is that God's own perfect nature requiring Him to create imperfection to fulfill His role as the perfect being places a limit on God's options. i.e. If He wanted to make the universe, he would have to allow evil so the universe could understand His goodness. But as Christians believe He will eventually eradicate evil, and for now we are only proving God's point by demonstrating the extent of evil. But "does the end justify the means?" I'm no theologian, but there's always the quote "God works in mysterious ways."

On an interesting side note, can you even imagine what a world without imperfection would be like (before you learned of imperfection anyway)? I think it was Siddhartha Gautama (later known as the Buddha) who was supposedly raised in a palace and never allowed to see imperfection until one day he leaves the palace and sees certain 4 imperfections in the world. He then says "the world is full of suffering, suffering is caused by desire," and yada yada yada. He then went waaaay overboard and tried to live a life of poverty. My point being, even a guy who never experienced suffering actually tried out suffering like a pair of shoes once he found out it existed just so he could better appreciate the concept. Supposedly anyway.

As for free will, my take is that history is charted on one timeline because God knows every choice we will make before we make it. But from our perspective, there are as many possibilities for history as there are choices. And even though our choices are in fact limited by external factors (ex: genetic limitations, social limitations, etc.), everyone has at least some choices they can make. To use a metaphor, imagine yourself standing in front of an open fridge trying to decide what juice to have for breakfast. You have orange juice and apple juice but you want pomegranate juice. Now even though your choice of juice is limited by what's immediately in your fridge, you still have choices available within the context of the fridge. So even though your total choices are limited by external factors (you don't have the juice you want in your fridge), from your perspective you still have choices available to you. And from your perspective, you can say God knows I'm going to pick orange juice, but I still feel like I'm able to pick apple juice all the same.

As always, please feel free to post comments, agreements, contradictions, etc. on either argument-- why does God allow evil or free will.