Well, free will explains the second half of what you say. Do you really think believers need God to be good? You say right at the beginning that God isn't necessary for that. Except for the fact that you need free will to explain it, I don't think we are doomed at all.
As far as why it would be undesirable. Think of all the great and wonderful things we have due to this belief. Salvation, forgiveness for our sins, an ever-lasting soul, miracles, etc. (there is more too) - I say that is some pretty amazing stuff.
So you can't see why a believer would say a world without those things is pretty undesirable?
I don't think that all believers need God to be good. But, ask yourself why it'd be so bad without God. Why would it get worse if there is free will and, as you imply, believers don't need God to be good. Salvation? Again, in a world without God, you don't need Salvation. You have one life to live and it's up to you how you want to live it. What you do in this life actually matters, because it's the only one you have.
Well, your belief makes you feel better. So, in a sense, religion is a good thing. Christians always talk about sin and being forgiven for sin. What does this mean? If there is no god, then sin is just sin. It's something that would be determined to be bad. If you commit sin, it's up to you to right your wrongs. You can't just "find" God while in prison and suddenly be a good guy (or woman).
Everlasting soul? Ask all of the good non-christians that will be going to Hell if they want an everlasting soul while they are burned and tortured. Miracles? What miracles? I've yet to see anything that can actually be considered a miracle that is unexplainable. However, I do see massive Earthquakes that kill thousands of innocent people, hurricanes that destroy homes and misplace families, Tornadoes that level entire cities, and fires that sweep through huge areas of land, killing wildlife, burning down homes, and even killing people. These are not miracles.
I hope you have comfort in your religion, because every time I lose a friend or family member because they find out I'm an Atheist, I start to hate religion just a bit more. Every time I see a kid who is sick and his parents use prayer as medical treatment, I hate religion a little bit more. Every time I see an abortion clinic bombed because of some idiot radical Christian, I hate religion just a bit more. Every time I see a Muslim blow himself to kill others, I hate religion a bit more.
Sure, some atheists are assholes. Hell, a lot of us are, but you won't find many of us that want to kill people because they believe in something different than we do. You won't find many of us that will try to take away a right that every human being should have.
Point is, I see religion as more of an impediment to peace than a help.