This was a post in a theology discussion on the ADF religion list. I'm actually horning in on a question directed at Cei Serith. How did I do?
>> I think that every religion has to answer the question of why bad things happen to good people.
> And if someone asked you this question now - what would you> say?
> Blessings,
> Briar.
1: Evil must be defined. Classic theology usually divides evil into natural evil and moral evil. Natural evil is stuff that hurts - disease, injury, natural disasters. One might place some kinds of emotional pain in this category - death causes emotional pain, thus death is an evil. Moral evil is in deeds that violate a (divinely) given moral system. Most moral systems attempt to make rules to prevent the pain of natural evil - allowing spouses to sleep with other people violates the pride and security of the mate, thus causes emotional pain, thus is made illicit. Elements of 'fairness' and right dealing enter in moral judgments as well, which may be less directly related to physical or emotional pain. Natural evil happens to all people in all times. It helps to shape notions of moral evil, which are entirely conditional to culture and locality.
2: Then, we must describe what we mean by 'god'. Western monotheism has the problem of explaining how a single all-powerful, all-knowing, administrative being who is described as both loving and just can allow/cause evil to occur. Why would humans not be made with an inherent moral sense? why would the universe be made to contain pain and loss? This difficulty is why evil is a Problem in western theology.
3: The good news is that much of this is No Problem for a polytheistic theology. For a polytheist there is no single being that made the worlds (even if there is a single being out of which the world was made...) no single intelligence, no single will, had the option of making everything work perfectly together. Polytheistic models of 'creation' are another theology post, but we start by saying that the divine is not unified in will or intent. In the same way, we have no notion that 'god is love'. Lovingness is one aspect of many deities, maybe all, in some way, but so is every other kind of quality. For me, I like 'wisdom' as a primary description, but, in a polytheism, we each choose which kinds of gods we work with.
We can say that pain exists as a desirable and natural consequence of the ability to feel. It warns us of damage, teaches us how to avoid harm. Perhaps we might teach that wisdom lies in managing one's own emotions in ways to minimize emotional pain, yet emotional pain may be considered a source of spiritual growth. Pain that harms or degrades is an 'evil', in the sense that evil is 'stuff we don't want to happen'. But that happens because humans fail in strength or wisdom (i.e. can't run fast enough or manage to avoid getting caught by the tiger), or by deliberate malice.
Most every culture holds that deliberate efforts to cause harm or loss are to be avoided and deterred. This becomes moral evil as the cultures set rules and norms to avoid harm and loss. Many cultures enforce these norms with social methods - humiliation, loss of honor, possible loss of social standing and legal rights connecting to it. Some cultures make a whole judicial system out of it, and even imagine a deity ruling a court of judgment on those who break the rules (and who don't have a good representative...).
Pagan cultures have develop this sort of code as well. There is some notion that a Pagan afterlife may include reward or punishment for deeds, but the afterlife is usually based more on initiation into the correct mysteries than conforming to the right moral codes. Wisdom teaches that it is good to avoid harm and loss, and our own wisdom, guided by that which we inherit, must decide what will be permitted and what condemned.
Why do humans deliberately cause harm and loss to others? Most usually it is a matter of conflicting needs and circumstances producing anger and desperation. The hungry person steals bread, the angry person lashes out. Those subject to long-term exploitation or unfairness seethe with resentment. Emotional pain is notable for its ability to persist. Our ability to relive an event or insult in memory allows anger to seethe and grow, and anger eventually wants expression. Moral and legal codes are devised to deter humans from acting on those emotions in ways that cause harm and loss. Some people seem to have defect of mind or character that makes them more willing to cause harm and loss. To them society's duty is first to educate and retrain, but second to restrain and prevent harm.
So, a Neopagan Theodicy:
1: That the multiple nature of existence naturally produces occasional conflicts among systems and individuals.
2: That these conflicts can produce harm, loss and pain. This is what I mean by "evil". (A Pagan theology need not make 'obedience' a primary virtue - merely disobeying is not itself evil, but only by it's result.)
3: That the Gods often teach how to avoid evil, but more directly, the Gods and spirits give wisdom to humans, and humans devise strategies to avoid evil.
4: That moral codes are local and conditional, not themselves given by divine fiat. It is between the society and the individual as to how codes are formed and enforced.
Without the conflict between an all-loving all-creator god and the facts of existence, the problem of evil becomes rather simpler
My summer's all screwed up (in a chaos-of-potential sort of way) this year, due to the change of date involved in Starwood Moving to Wisteria. Usually things are buckled-down after Solstice, as we get Every Last Thing done, then the end of July is wild, leading directly to Lughnassadh. This year it's all moved up several weeks - we go to Starwood on the 4th of July, and then have the rest of July to prep for the August High Day. So between Solstice at my house and a lovely trip to Washington to the nascent Trout Lake Abbey for the NW ADF Eight Winds Festival, I'm approaching the Big Festival with a serious sleep deficit. Ah well... 
