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Personally, I'd like to accept the 'God allows us to have free will' theodicy because it suits my understanding of why people do bad things to each other. But then i cannot grapple with the fact the bad things also happen to people that other people could not possible be responsible for, such as natural disasters. Is God trying to test our faiths when/where applicable? Did He just set the Earth in motion with its physical & biological laws and then step back vowing to have minimal interference or none at all [none at all would invalidate some biblical accounts of intervention]? Is the 'good and the bad' all subjective and not properly placed in the divine context [this explanation sort of contradicts the 'testing our faiths' question...or does it?]?

Or could it be that I'm making the fundamental mistake of trying to comprehend God's actions/inactions by trying to think of Him through the lens of a mere human's understanding? Yes, I believe that's it.

I don't presume to say that I know the will of god, but I do know something about math and from that perspective it's fairly easy to see how circumstances which may seem abhorrent to us at the time might actually be the least bad choice for an omniscient being.
When your beautiful 6 year old falls off the couch leaving a small scar on her otherwise perfect chin, it may seem horrible, but if fear of that moment keeps her away from the cliff edge at that moment when the rocks give way, saving her life, well then it was a small price to pay.
Civilizations are like that too. So long as we approach our relationship with God from a position of humility, and do our best to embrace his laws as our own, everything will work out in the end.
It's only when we believe that we are greater than god that our arrogance can lead to evil. When we allow our collective morality to be based on the feelings of each individual, the result is perdition. It's times like that which lead to what happened in the camps. Those who do evil, almost never know it... they believe in their heart that they are being just. But since they have abandoned god, they have only their ego to look to...only that arrogance to look for the rules... and that is the root of all sin.

None of the biblical miracles violate free will or the laws of nature. In a fallen world, Man's responsibility is to perfect it in partnership with God. The world has never been a paradise. One day it will become that and more but only if we are worthy of it. Then too, the Messiah will come.

I have always dealt with that issue in this way:

To have the chance for growth, we have to live in a universe where change does happen.

Change is not always good.

Yet even the horrid things that happen allow humans to act in the very best way, by reaching out.

In very real ways, we have the poor, the needy, the injured, the unlovely in part so that we can be those who reach out, and be those who are in need.

None of this could happen in a static universe.

For some people, the fact that bad things happen to good people is evidence that either there is no God or that God is not loving.

The answer God gave Job is "When you can see things with my wisdom, then I'll explain it to you." Or, put in another, ruder way, "This is the way I set it up. Deal with it."

And our choices are simple. We can curse God and die, or grow into the people we wants us to be.

Auschwitz is an example of Man spitting at God. The tsunami is an example of a world where things are not static.

We have the freedom, because of the way the universe is created, to respond to both of them, in whichever way we choose.

I remember reading a bit about biblical mythology in relation to this. In Revelations, there is a passage that an angel eats a scroll that tastes sweet but is bitter when swallowed. This scroll is the title deed to the earth and whoever posesses it is able to control the events on earth. Adam was first given it and paradise resulted. But then Adam fell into temptation with Eve and as a result Satan was given the title deed. Now, Satan is also known as "The Prince and Power of the Air." This makes sense since the majority of the worst natural disasters are tornados and hurricanes, of which Satan might cause them. Now admittedly God has helped at times, but only in extreme situations (slavery of the Jews in Egypt, Sodom and Gammorah, Noah, etc.)but ultimately Satan has been given the majority of control and influence.