In Isaiah 45:7, it says that God created light and darkness, and good and evil...Does this really mean that the source of evil is God? The Hebrew word in this verse is "rah" but does this necessarily mean evil in the sense that we all think of it, as in a Satanic force? Would it be better translated as bad, ruin, calamity, or adversity? Or is evil the best word to translate it although that word is much worse than some of the other words I suggested?
You are right to wonder how pure evil could come from a good God. In fact, I believe that the word "evil" here is being used in a relative, rather than absolute sense. In other words (as I explain in the summary section of my online book on Isaiah), the first eight verses of chapter 45 describe how God orchestrates the destinies of nations to fit His plan. When the direction a nation is taking runs counter to God's Will, He will force them from their path...something that is surely evil in their eyes.
You can see a similar usage of the word in Lamentations 3:38 where the context fairly clearly suggests that the "evil" in question is relative to the sinners who have brought these tragedies upon themselves, who in a sense "forced" God to do this to them.
As far as the word "create" (which, on first glance, wouldn't seem to fit with a relative reading of "evil"), the medieval scholar Radak understands it to really mean the verb "decree" - much as the same word
would be read in Numbers 16:30.
Did God create that directly? Or is it something that his angel, Lucifer manifested due to his own pride?
Judaism doesn't believe in any force that stands in opposition to God (besides human beings who could choose to oppose God with their special free will). We believe that Satan is an angel who acts entirely within
the Will of God. His precise and complex nature is something I dealt with in an essay here.
In other words, if God created evil, why isn't it okay to do evil? Perhaps God has created evil indirectly? God has given free will and from free will, we abuse others and create evil ourselves or by the temptation of the Devil or Satan?
Evil isn't really a creation: it's a value that we apply to behavior. Now we were certainly created with the ability to choose to do evil, but I believe that it is a value that has some relative qualities (what might feel evil in one context or from one perspective might be righteous in another).
Also, does the word "rah" indicate the type of evil that includes killing children and sodomizing innocent people through rape or other methods? A friend of mine that reads Hebrew suggested that there are other words that could describe that action better than "rah."
The Hebrew word "resha" (רשע) which can be translated as "lawlessness" is probably closer to what you want. "Rah" (רע) is probably better translated (as does Rabbi S.R. Hirsch) as "broken" (indeed, not too far from "ruin or calamity") - which, in our context, would then mean: the social or moral disruption which our actions have brought upon ourselves.