1. Suppose hypothetically that God is still creating the world, using processes we’re only beginning to kinda-sorta understand — processes that entail generating lots of variations and keeping the ones that “work” as the starting point for later variations.
(These processes of the ongoing creation seem to include us as construction workers, incidentally: our powers of imagination let us generate new variations, while our powers of perception and memory let us see and remember — imperfectly — what does or doesn't work.)
This hypothesis is not totally implausible, not if you take a long view of what we think we know of history.
2. Under this hypothesis, we can readily argue that the world isn’t “broken,” but simply unfinished.
(When will it be finished? “Who” knows.)
Certainly we mortals dislike, and even get angry, about some of the variations that get generated. Sometimes it’s virtually indisputable that our anger is well-founded.
But it also seems indisputable that, over the long, long term, our encounters with what we call “evil” help us learn to do our jobs better in the Creator’s construction crew.
3. [EDITED 4/2/07:] Maybe our anger at “evil” is analogous to a toddler’s rage at being subjected to a painful medical treatment. Given the authority, the toddler would certainly reject the suffering. But others more knowledgeable than he have made the loving judgment that in the longer term, the suffering is worth it. Perhaps the Creator has made a similar loving judgment about humanity and "evil."
4. Morally, this view may depend on the existence of something like a heaven; I’m still working through that part.