kittie,
I missed your question about why Eru created evil. I have a little different take on the matter. Here is a quote from the Silmarillion from: Of the Sun and Moon and the Hiding of Valior
Quote:
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'Dear-bought those songs shall be accounted, and yet shall be well-bought. For the price could be no other. Thus even as Eru spoke to us shall beauty not before conceived be brought into Ea, and evil yet be good to have been.' But Mandos said, 'And yet remain evil. To me shall Feanor come soon.'
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It is through the struggle against evil that beauty not before conceived can be brought into being. Evil is the anvil that Eru uses to shape and form his Children.
As for your question about Sauron getting greedier and greedier, I wouldn't say that. He did not get greedier. He desired to control that which he had no right to control. Because he had great power, that desire to control took over. Power corrupts. Absolute power corrupts absolutely.
It seems to me that Galadriel started down that path at the beginning of the Noldor Rebellion.
Quote:
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No oaths she sware, but the words of Feanor concerning Middle-earth had kindled in her heart, for she yearned to see the wide unguarded lands and to rule there a realm at her own will.
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The rings of power were a direct result of the Elves' desire to rule and dominate their own realm. Galadriel learned from the long defeat and passed her test.
X Phial,
Actually, in his letters JRRT states that the elves were also fallen.
I seem to remember reading recently in Morgoth's Ring that Elves were an unfallen people.