Well, when people ask why God allows evil, I usually respond that God allows bad things to happen to good people not in order to punish them for their sins (since God often causes Christians to suffer), but to give humans an earthly allegory to what fate awaits those who do not repent of their sins and turn to Christ. I also cite St. Luke 13:1-5. They often tell me that my answer does not excuse God for allowing evil.
And therein lies the problem. At this point, we are no longer asking why God allows evil, but rather we are trying to judge God for doing so. Anyone who believes in a sovereign God (and who knows what it means to believe in a sovereign God) essentially believes that the universe is run by a dictator. Granted, God is a benevolent dictator who is full of compassion, but he is a dictator nonetheless. As humans, we are not given the privilege of questioning God's actions. We can certainly ask him for an explanation (which he sometimes provides), but we may not stand in judgment over him. The atheist commits folly by concluding the nonexistence of God on the basis that God does not act according to the atheist's moral standards.
Again, I'm not attempting to judge atheists for their beliefs. I'm only trying to explain why an atheist will have a hard time converting me to his faith (though he is always welcome to try).