How can God care when there's so much hurt in the world?

This is a question that's often asked and no matter how people may answer it, unfortunately for me it never seems to make sense. My daughter recently said to me that God cannot be there or care, cause he allows so much hurt. She recently took part in a memorial event about the holocaust and the horrors of this had a profound affect on her and myself too.

I can understand why she would think this about God. I've really struggled with it myself and I guess for now anyway, there's only one answer that can attempt to make sense of it. I go back to what my daughter said, "allows" so much hurt.
I do not believe that God causes hurt, that when disasters happen that it's God's will. I believe that God allows things to freely happen, that he does not interfere. In his love for us he truly allows us to be free. I believe he allowed the universe to come into being (freely) and was not hands on in it's formation.
This suggests a distant God, a God who's not involved. I don't believe this. I see it that God is in all things and makes up all things. Just as energy becomes matter, the universe coming into being. We're told that Jesus said that whatever we do to one another, we do to him.
It's not that God's distant and not involved when terrible disasters happen or when people suffer at the hands of other people. It's that God is completely involved, is actually present through everyone of us and everything. When we suffer, he suffers with us. He experiences it all.

If it all goes back to God and he's present in all things why doesn't he stop bad things happening then?
If God really did and does allow it all to be free, would he suddenly interfere?
Can you give free will and then take it away when it doesn't suit?

In my capacity as a Father I want to protect my children, but I also need to allow them to live. This can be very challenging.
I need to allow them to make their own choices too. As they grow into adulthood I really need to let them go. They are then old enough to make up their own minds and live their own life. If I allow them to do this, even if it means them doing things wrong, is it wrong of me as a parent? Does this mean I don't love them? Their behaviour can still hurt me, but they are free to be. I need to allow them to make their own free choices, even if I know that as a result of this that they can/will hurt others.

Doesn't the same apply to love? I despair when I hear people saying that they love someone because they do this or that. What happens if the person does not come up to standard? The love stops? I really struggle with this being love, it doesn't talk of love to me. I don't believe in conditional love. To me, love can only be unconditional.
Some people talk of not deserving love. To me, if love is given only because it's deserved, then it's not love. Love cannot be earned or lost. There's nothing that my children could do to either gain love from me or lose my love. It's a given. This is not just restricted to my children, but I will only use this example now.

I believe that God in his unconditional love for us, would allow us to be free. That just as I will try and guide my children on being loving and caring, God reveals to us through the heart on the best way to be. He still sets us free to be though. Just as a parent sets their children free when they become adults, even though in doing this they know that we can/will hurt one another and experiences first hand all the hurt too.