Just because God knows what will happen, it does not mean we dont have free will. For example, if you have a super-ultra-computer, that can analize each event that has happened, and the events that are happening; and the interaction between one and another; it can predict that, according to the way of thinking of some person, and due to the latest events that ocurred; he will do certain action.
Free will is the capacity to decide what is the "best" course of action, during a circumstance, in order to achieve certain purpose.
Also, dont forget that God is omnipresent, omniscient, omnipotent, omnibenevolent. By being Omnipresent, he is everywhere everyTIME, he is the past present and future, and that is why I think he knows it all XD.
As I said, it is an ages old dilemma. Reconciling it is a matter of faith, not logic or science. And there are religious people who believe in predeterminism, so it's not a simple case of right or wrong.