You do realize we don't believe God created him as Satan right? He chose that for himself. And no, he can't really challenge God, his loss is inevitable.
If I recall, some denominations believe that God made some sort of agreement with Satan to allow him to tempt human beings to sin with his many promises of earthly pleasures, whereas God doesn't do much tempting - apart from maybe burning in Hell but I don't believe in that - but offers heavenly reward to all who stay true to him. This was something akin to Satan ruling the Earth and all things corporeal but God ruling everything eternal and heavenly.
This would make the most sense; the Devil exists solely because God allows him to. It would violate God's omnibenevolence to destroy Satan as he is just as much a child as anyone else.
There's also another take: that Satan isn't the root of evil, but an agent of God, meant to tempt God's children - with God giving the permission to do this, of course - and deal out punishment(Hell) when they fall to those temptations.
There are many takes on the Devil besides the whole "root of evil, pure evil, enemy of God, etc." argument, but you would most certainly be correct in his inability to fully match God. Created by God, and allowed to continue his ways by God. And also serve as a nice way to test the faith of humanity.
Furthermore, God created Lucifer with free will, or the ability to chose. Since I believe according to Milton God created Lucifer before humanity, God made the same mistake again by giving humans free will.
Isn't free will considered God's most precious gift?
And of course he'd make the mistake; as an omnibenevolent being, he wouldn't enslave his own children.
If God knows everything, he must have therefore known what Lucifer would do before he did it, and you would think he would then simply decide to not make him in the first place.
1. Perhaps God's omniscience is of all things past and present, but not future. God can't know the future perfectly, as otherwise free will kind of loses its purpose; he may know all the possible futures via knowing the outcomes of every action, but perhaps not THE future.
2. God's unconditional love would prevent him from punishing Lucifer, especially for crimes he had yet to commit.
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In terms of creationism, God's love of free will would probably lead him to just send out life force or some such, animating life and then letting it run itself. The first water molecules or whatever come to be, they eventually grow more and more complex... and so on.
And when an intelligent race unveils itself, God decides it's time to try and get them to follow him. But in his belief of free will, he says you need not believe in Him. And in his omnibenevolence, he most certainly won't consider that faith a requirement to get into his kingdom.