This is a perfectly logical argument. I see many other problems with the free will defense as well. It destroys the concept of morality because if it is right for God to refrain from using His power to prevent or remedy evil, then it must be equally right for we human beings to also refrain from preventing or remedying evil, since we too should respect the free will of those who commit evil acts. If that is not logical for us, why would it be logical for God? And even the very origin of evil as we know it, which in biblical terms would be that Adam & Eve ate from the forbidden tree of the knowledge of good and evil, seems also to have been caused by God Himself, who chose to plant the forbidden tree in the Garden of Eden where Adam & Eve would easily have access to it. I could even say that if the knowledge of good and evil is the result of eating the fruit of the forbidden tree of the knowledge of good and evil, then Adam & Eve would have had no way of knowing that it was an evil act to eat of the forbidden fruit until after they had done so. Only by eating the forbidden fruit can you understand that you shouldn't eat the forbidden fruit. God apparently created this trap so that he could then punish Adam & Eve, and then continue to punish the descendants of Adam & Eve forever, even though we never ate the fruit ourselves (but have apparently inherited a knowledge of good and evil anyway) as shown by the fact that we were not invited back into the Garden of Eden even after Jesus (supposedly) died for our sins. So now God forgives us but continues to punish us for something we did not do. God not only allows evil to exist, He seems to have caused it Himself.

The Problem of Evil is therefore very theologically serious. But the more fundamental problem is still simply that there is no evidence that God exists.