It's real simple.
In order for us to truly have free will, God has to allow the possibility that a person exercising their own free will could commit evil/wickedness. It's not that he likes it, but you can't have one without the other. If we were all only allowed to do good, then in effect we are not free to exercise all of our will completely.
It's an unfortunate by-product. The only saving grace is that our inherrent and god's inherrent nature is always good, and that is what all beings are at their core. It's the perversion of free will that destroys that in individual souls and others.
Karma is the momentum of bad or good actions. It is not evil or good in and of itself. Just momentum generated by free will being enacted.
I think this explanation makes more sense than a testing period of satan. If anything, Satan and evil could represent the negative consequences of man's free will.
--Rich