The argument we were discussing was that god was either evil (as in not good) or not omnipotent.
Whether humans must be evil due to free will is another discussion entirely, and I would propose that free will is never entirely free and always limited by our perception and understanding of the world. If evil didn't exist, you would be as free to be evil as you are to ignore gravity. Also, most religions believe in a paradise free from evil, so does that mean you lose your free will once you enter?