1) God gave us free will, but then followed up by basically saying "if you don't follow me, you go to hell", which is kind of the equivalent of saying "your choice, but only if you make the right choice". How is this fair?
I don't think God gave us unlimited free will. Let me explain: Every choice we make sets us in a particular course of choices that develop a kind of momentum that over time becomes impossible to overcome. We may begin with a genuinely free choice but the choices we make that tumble out of that first choice slowly but inexorably limit us.
In any event, God giving us free will does not oblige Him to suspend any and all consequences of the exercise of that free will. Why should it? We may have the freedom to choose, but we do so in
God's universe. He calls the shots here; He establishes the rules. That's in part what makes Him God. So, we may choose as we like to obey God or not, but as in most choices we make, there are consequences - good and bad - that result. Why shouldn't there be?
2a) I do not understand the differnece between repentance and just acknowledging a fault.
Acknowledging that your sin is, in fact, sin is
confession. Turning from that sin to a life lived in obedience to God is
repentance. These things are related but not identical.
Now an atheist does the same, without the praying. Both of these people continue to do the same thing, both grow up and become better and better people, but in the end, (I assume), the atheist goes to hell, and the christian goes to heaven. Why?
Because all the selfish sinful things we do are always ultimately against God. It is not enough to acknowledge to others your faults and failings; you must go further and call your failings what they really are: sin. And then you must confess your sin to God. If you do not, God says that in His universe you will suffer the consequences of breaking His moral law.
There is no person who is ever good enough to enter heaven. Heaven is God's home and all who would enter there must be perfect as He is. But the best of us never even get close to the holy perfection of God. We have a problem, then, don't we? God solved that problem through His Son, Jesus Christ. Read the Gospel of John for all the details.
2b) Also, I fail to understand why several thousand years after Adam and Eve ate the apple, I still retain inherent sin from that, and have to repent. That's like saying that the grandson of Hitler has to apologize every day just because he's hitler's grandson. It just seems more petty than all-loving. Please explain?
This is, in part, why sin is so hated by God. It never just affects the one who sins. Sin spreads corruption and death which is what happened when Adam and Eve sinned in Eden. We all descend from them and so inherit the corruption and death of their sin. But, God has made a way through Jesus for us to break free of the power and penalty of sin. He didn't have to do so. He was well within His rights to send every one of us to hell. Instead, He showed us incredible mercy and grace, making atonement for our sin on a cross some 2000 years ago. This sounds pretty loving to me...
Why do I go to hell, even if I were to live following all the moral rules of the Bible just because I don't acknowledge god?
Because, as I said, it's God's universe you're in. Every moment of your existence is entirely contingent upon Him. Why, then, should you be free to live with your back to your Creator in His universe? If you want absolute autonomy, make your own universe.
Selah.