In my view,
p1 If a Creator exists (conditional premise),
Ok. Got it.
p2 We humans were created with free will and with a conscience enabling us to discern right from wrong.
Is this a conditional premise also? Otherwise, P1 does not necessitate P2 (i.e. If P1, then P2). Or is P2 an assertion of fact on your part, that we exhibit free will and have a conscience that enables us to discern right from wrong?
If P2 is an assertion of fact, then I would argue that the assertion is not valid. There are a lot of factors that influence and even restrict our volition, from each of our unique neural patterns of our CNS, to socialization and indoctrination, etc. In addition, some are born with an inability to discern right from wrong and others can loose this ability due to injury or illness that affects certain regions of the CNS. This leads me to conclude that discerning right from wrong is hardware dependent and not universal nor immutable.
p3 Good behavior eases suffering while bad behavior contributes to it.
P3 is factually not true. There is a greater correlation between suffering and wealth than there is between suffering and behavior. The greater ones economic resources, the greater ones ability to either avoid suffering or mitigate their suffering.
There are people who are born into miserable circumstances that suffer regardless of how they behave. There are those who behave immorally or unethically and suffer very little.
p3 A world without suffering would present no challenge to motivate good behavior over bad.
Concepts of good/bad or right/wrong are man-made constructs that regulate and arbitrate between conflicting needs and wants of individuals who live and interact in cooperative groups.
If you were the only human on earth, concepts of right and wrong would have nothing to do with whatever suffering you might be experiencing. If you are able to maintain adequate nutrition and shelter, you would presumable not be suffering, except perhaps from loneliness. Any other suffering is likely to be the result of injury, illness, or severe environmental conditions, none of which is the result of bad behavior.
p4 We humans have indeed been making moral progress. We have learned to treat each other far better today than at any time in the distant past.
I would agree with this. Yes, our social systems are evolving over time. I do not see that P4 requires P1, the conditional premise.
c1 Therefore, if a Creator exists, it's likely that life was set up as a learning process. Suffering was needed as a challenge to motivate good behavior over bad.
Effective enforcement of societal rules is required to incentivize good behavior over bad, good and bad being relative to a particular group or society.
Suffering simply motivates one to end the suffering by any available means. If no means are available, then we simply suffer for no other reason than we cannot stop it.