If you are a religious person, which you're not, you'll understand this a little better.
Ok, here's the deal. God gives us life, he gives us a mind, a body, and most importantly, he gives us free will. Now, we make the choice to believing him or not. Also, this depends on how much we know. If we're talking about someone in Africa that hasn't even heard of god, then he is one issue. But if we are talking about about anyone else that has been relatively well exposed to religion, god etc.. and yet denies him, and continues to live a sinful life; then he is another issue altogether.
We believe in a merciful, loving, and kind god. That's absolutely true, but we must also pay his kindness for giving us a great life by our faith and living a life of morallity, free from sins. When we don't do so, we will go to hell. The concept is quite simple really.
Now religion suggests that life is a test, if you pass, you go to heaven, if you fail, you go to hell.
In different context, think of god as being the law itself. If we disobey the law, we go to jail, don't we? The law is not being a sadistic bastard here, it's just being fair. If we live a moral life, if we prevent ourselves from lifes temptations, and prevent ourselves from sinning, then we will live with god in heaven for eternity. Simmilarly, if don't comply with the rules, we go to hell.
God is not evil, the law is not evil. Jail and Hell are not evil, they are simply the negative destinies we achieve after faiiling the test.