Can a being, entity, agent, or whatever we want to call ourselves--however we want to refer to this creature 'man'--can we be said to truly be 'free' if we don't have the option to choose 'evil'?
There are many who believe we have no freewill to begin with, that all our thoughts and actions are merely the products of a cause-and-effect universe running smoothely along with an imminent precision more perfect than anything man himself could devise.
But for now let's assume, at least for the purposes of this particular question, that we do have limited freewill.
We may not have the material freedom to perform any and all manner of physical actions. For example, no matter how hard I try I will never be able to willfully transport myself to Saturn for a close-up view of its pretty rings. But for the purposes of this debate, let's assume I am capable of willfully choosing between right and wrong, cruelty and charity, love and indifference, good and 'evil'.
Oh, and we must also assume that God exists. (I know, I'm asking everyone to assume a lot.)
Why did God create evil? Because He wanted to give us the option to defy him. If I go into a Baskin Robbins and they only have 30 Flavors available for me to choose from, then I'm jumpin' somebody's ascot, 'cause there's supposed to 31 freakin' flavors as an option there, right?
God had to create evil, the 31st flavor, so he wouldn't have people jumpin' his ascot.
Of course, I could have made this whole thing up, Skwim. Bwuhahaha . . . and maybe God and freewill aren't even real.