OK, I'm going to tie my answer to this one to the answer I tried for the last question (though you'll see that tie only in the later steps).
First, consider the nature of a universe in which evil simply does not exist at all--no decay, no physical entropy or death, nor any other possibilities for negative or bad things. This raises a serious problem, when it comes to introducing sentient beings into that universe.
Basically, there would be no contrast between moral choices. And without a possibility of contrast, one does not have the experience of understanding
why a thing is right, or of making a conscious choice to do the right thing. We could not
grow or
become anything. Basically, we would not be any different from other animals.
The main premise of the Judeo-Christian Creation story is that humanity was created in God's image. Excuse my being a little funny, but we were basically a "Mini-me".

Now, remember my comment in the last post that God has a choice in what He does even though He does not actually do all things? I'm going to use a similar premise for human beings. Just because the
possibility of evil is there does not mean we have to do it. We can choose against it. We were given free will.
So, when we make a choice to do what is evil, the fault for that choice is on us, not on God. But when we do what is right, understanding that there was also an evil choice, and that something is wrong about that choice, and therefore we don't do it, then we are doing exactly what God would've preferred we do all the time.
I know this is not a perfect explanation by any means, but this is the best I can explain what understanding I have.