How could God create man knowing that many would still go to hell?

I don't know the answer to that question, and I don't think any of us will this side of eternity. We can speculate, of course, and make biblically educated guesses, but I don't know if I have a ready-made answer.

Like you, I am sure that when we are on the other side of eternity, it will all make sense to us, and that's good enough for me, and I'd imagine
it's good enough for you, but I know that doesn't satisfy your agnostic friends.

I know that God is far more merciful than anybody in the universe and far more wise, so I know there are no mistakes made with who goes where
eternally. I also believe (based on scriptures like 2 Peter 3:9) that God does everything possible to save men.

I know that Jesus says that narrow is the way to eternal life and few there are that find it and broad is the path to destruction and many there are that find it, but I also know that Revelation seems to suggest that there is a multitude of believers so big that it can't even be counted.

I think you know what Paul says to the Corinthians about who is the clay to say to the potter, "Why did you make me this way?" But I also know that God understands why we ask that question.

I've heard it described that if God made us all without free will and
just designated us all for Heaven, we really wouldn't learn know much about
love, because we wouldn't have free will, we'd just be automatons, slaves,
really.

You know the old saying, "If you love somebody set them free ..." I know you know that, but let's take it a step further: If you could somehow imagine yourself as nothing and God came to you and said "Would you like to be something? Would you like a chance to become the most magnificent species, the only one created in My image? Would you like the chance to have eternal life with perfect communion with me? Now, the disclaimer is, you will be tempted, and you could end up becoming deceived and turning away from me and ending up going to eternal punishment and regretting your decision?" Don't you think that the average piece of nothing (I know this is difficult to imagine) would still want to take that risk?

God knows that for some reason He can't offer this mortal life and this eternal life as creatures in His image without giving us free will, and if so, He has to have two places where we can spend eternity, one for those who want to be with Him, and one for those who don't. I'm sure the concept of Hell grieves God, because He says in the Bible that He takes no pleasure in the death of the wicked. But I know that we as humans crave justice as well as mercy, and that necessitates a place of eternal judgment for those who reject eternal mercy.