This is getting into deep water, and there is lots and lots of scholarly work (including debate) on this subject, most of which stems from Augustine.
I certainly can't speak on this subject like they can, but here's how I view it, and I hope this is helpful. I think that your trouble with this subject first stems from viewing God as in time, much like human beings are. I don't think God is in time; God is time. So if you'd like to think of time as a straight line on a page, God is the page, and exists, simeultaneously, at every point on the line.
With this in mind, God knows, instanteously (but this is a bad word, because it presumes that God exists temporally), the results of every possible variable in every action that we might take. So when I leave my office, I can turn right or left. No matter whether I choose to turn right or left, God knows the results of every possible outcome that can occur from me turning right or left. He knows this at all times because he does not exist in time.
So because there is no "before" and "after" to God, and because God knows the outcome of every possible choice, he can know, in the "present," if you will, what will happen to us--but he doesn't know in the "present" as we understand the present to mean, because there is no such thing as the "present" to God.
I know this is a difficult subject and I hope that I've been clear. If you're really interested, there is a lot of good writing on this subject.
I really don’t have any trouble with this subject, I just like asking questions.
Even though he studied and wrote a lot on the subject, how would Augustine actually know? In reality, how could anyone really know anything about this?
It would seem then, that God actually does create humans knowing they will go to hell.