Well, as people have been saying, it's got to do with free will. This may be a bad illustration (it works better with parents), but think about it for a second: Let's say you had two children. One loved you blindly without any knowledge about you or about why they should love you. The other loved you because they knew what you had done for them and in fact, they loved you even though they had the choice to not do so. Which would you rather have?
So you see, God put us here with free will, knowing that some would reject him, so that he could have a relationship with people, not puppets or robots.
Also, you bring up the point of God being cruel because he "sends" people to hell. Well, in order for God to be cruel, he would have to: 1) Do so out of pleasure, and 2) Not provide a way to get to heaven. However, the Bible clearly refutes both of those claims in TWO VERSES, which you've probably heard plenty of times before:
1) He loves us and hates that any have to go to Hell. However, being a just God, and seeing as sin must be kept separate from God, he must send people to Hell because they sinned. Romans 3:23 says that the wage sin is death, but that the gift of God is eternal through Jesus.
2) So THE way to heaven is Jesus. He provided Jesus as a sacrifice for the sins of all mankind. However, just like any gift, it's not yours until you reach out and accept it. I could hold out the keys to a brand new car and say "Here, I don't want it anymore. It's yours if you take the keys." However, the car isn't yours until you take the keys. In the same way, God won't let you in without the "key", which is Jesus. Those who choose not to accept him unfortunately choose to die forever in Hell. Given the choice between living forever and dying forever, I think I'd choose living.
Anyway, if you wish to talk more about this feel free to PM me. I'll also check back for your response in this thread.
God bless!
EDIT:
I do believe that you are correct about us believing in hell as being based on Dante's Inferno. But would you care to explain what exactly the Jews' view of Hell was? Just wondering.