So he doesn't know what will happen because he chooses not to?
Maybe. It might be akin to the old "can God create a rock he can't lift" thing. Free will might be that rock. If God sets out to allow his created to make their own decisions without God's knowledge/interference, he can succeed in doing so. This appears to limit his omniscience, yet it's actually a manifestation of omnipotence.
Or...he does know what will happen, but refuses to allow that knowledge to interfere with our free will.
Yes, God can definitely make choices. Not all choices fall into the good/evil dichotomy. Creativity, in fact, allows for innumerable choices to be made.
What we perceive as evil (death, pain, suffering) is, I guess, relatively evil to God. It's not essential evil that can not be handled, overcome, addressed, etc. Some call this the Christian cop-out, we just can't understand the big picture that God understands. If it's true, calling it a cop-out is superfluous.
If God sets out to give us free will, no, I don't think he will then take it away, or negate it, or override it.
Which I doubt because he could create a duplicate universe and run it on fast forward to see what will happen, if nothing else.
You're looking at this from a result-oriented viewpoint.
Let's say you give your kid a sports car. Five years later he/she gets in an accident, high-speed one, and dies. Does the result determine how we should view the gift?
From the mundane to the ephermeral...take intelligence. That too is a gift (or just work with that idea for the moment). Can intelligence be used for evil purposes? Sure. Does that result determine how we should view the gift of intelligence (again, assuming that too is a gift)?
-Elliot