Why did Krsna allow the jiva-souls to have the "free will" to enter the material creation?

And what is our original "eternal" position with Krsna knowing the truth that we are all beginningless and endless and were never created.

Only in the beginning of being trained up on the path of devotional service does the devotee pray to be taken over by Krsna's pure devotee and used by him to spread Krsna Consciousness in the service of the Lord.

In the beginning stages one MUST strictly follow the instructions of the Spiritual Master, Teacher or Guru in a "one-sided" discipline in order to learn proper actions and philosophy, to proceed to a more mature "two-way" relationship with the Spiritual Master,  otherwise by neglecting the orders of the spiritual master, one will again fall down to the lower species of life suffering repeated birth and death for what could be an almost eternity.

However, eventually over time the relationship, if it matures in spiritual life, will begin to blossom and mature into a "two-way" loving exchange under the guidance of a genuine bonafide spiritual master, where the disciple progresses to being Krsna's dear friend and experiences loving personal exchanges and reciprocates with Krsna.  

Eventually the jiva-souls who are properly trained up by the spiritual master, reaches their full potential and can choose to voluntarily enter one of the 5 categories of service to Krsna. 

The five transcendental rasas of a devotee.

1 - Sant-rasa - means the position of neutrality or fully attached  to the Lotus Feet of Krsna.

For example, they can become a throne, a flower, grass, trees a flag pole, a chariot etc to please the Lord. 

However, there is no full exchange or reciprocation with Krsna as these forms, there is no active service to the Lord only appreciation of the greatness of being with the Lord.

Srila Prabhupada - "Santa-rasa means appreciation of the greatness of the Lord, but there is no active service of the Lord. The land, the grass, the trees, the plants, fruits, or the cows in the transcendental world are supposed to be situated in the santa-rasa. As spiritual beings, they are all conscious of Krsna, but they prefer to appreciate Krsna's greatness remaining as they are." (Letter to Rupanuga - San Francisco 12 March, 1968)

2 - Dasya Bhav rasa means service or servitude to the Lord. From santa-rasa is dasya-rasa, which means voluntary offering of some service.

For example here the devotee offers service and bhakti to Krsna or Visnu on the Vaikuntha planets in awe, reverence and respect so there are formalities to follow putting restrictions a complete exchange of love. 

3 - Sakhya Bhav rasa means the different moods of friendship with Krsna. Sakhya rasa is service in spirit of friendship and well-wisher. 

4 - Vatsalya rasa is service as well wisher and affection. Vatsalya Bhav also means loving relationships, parental love, to love Kṛṣṇa as a mother loves her child.

Here, the devotee is older and senior to Krsna and is in the mood of parents and sees Krsna as their little lalla or dear most child. 

There is a free flow of motherly, fatherly (or paternal love) for Krsna which is indeed beautiful, but yet there is a scope for a more free flow of love without any restrictions.

5 - Madhurya rasa is conjugal love and the conclusion of Srimad Bhagavatam. This is the topmost madhurya rasa where the devotee is Krsna's dear sakhis (female friends) and lovers. 

All the boundaries that were there in earlier 4 bhavas are crossed here. 

The flood gates of prema-rasa fully open in this bhav and the heart of devotee and Krsna is flooded with love. Here, the devotee does everything for satisfaction and pleasure for only Krsna. 

Srila Prabhupada - "Madhura rasa is intimate service, friendship, affection and conjugal love. So in the Madhura rasa, everything is complete; there is Santa rasa, Dasya rasa, Sakhya rasa, Vatsalya rasa, and Madhura rasa. But each and every one of the rasas is complete in itself. A person in Santa rasa or Sakhya rasa is as good as one in Madhura rasa because in the spiritual world everything is absolute. But from the platform of spiritual vision, where there is transcendental discrimination, one can appreciate Madhurya rasa as complete as anything." (Letter to Rupanuga - San Francisco 12 March, 1968)

So, on the Vaikuntha planets and on Goloka-Vṛndāvana everything is voluntary, one's personal choice of relationship.  

Everyone is Kṛṣṇa's dear friend who experience loving exchanges with Him even if you choose to be a blade of grass or a pebble Krsna walks over.

The spiritual relationships in Vaikuntha and Goloka Vrindavana are unlimited and experienced in 5 main mellows mentioned above.

There are also no demons in Vaikuntha and Goloka Vrindavana as well, they only exist in the material creation when Krsna has His pastimes in there.

Even Krsna never leaves Goloka-Vrindavana to enter the material creation, instead Krsna as His 4 armed Visnu-tattva form, enters the material creation playing the part of the two-armed original Vrindavana form of Kṛṣṇa.

Vaikuntha means without anxiety, so how can demons be there?

The impersonal version of being in God's Kingdom is where the jiva-souls are forced to give up their free will and individuality and then allow their version of God to take over their every actions and thoughts, such nonsense version of "surrender" is mayavadi impersonalism.

Therefore, denying the individual jiva-souls to have their own unique independent personality, character separate from Krsna's Personality and foolishly claim the real meaning of "surrender" is allowing God to "flow through you" and do all the thinking and actions for you in the name of "surrender," is dangerous impersonalism.

Having free will allows the jiva-souls to be independent thinking persons who can voluntarily choose for themselves what to contribute in their personal unique relationship with Krsna.

Voluntary service is the correct meaning of surrender in Goloka Vrindavana and Vaikuntha, which are the permanent eternal homes and origin of  all the marginal living entities (jiva-souls).

The jiva-souls in Vaikuntha and Goloka-Vrindavana are forever expanding the expressions of their unique individual personality with unlimited varieties of service that forever increase and expand the loving exhanges between Kṛṣṇa and the jiva-souls.

In this way, an increasing variety of personal devotional offerings, based on free will, are offered to Krsna.  

It is never a nonsense "one-sided" master/slave mindless relationship with Krsna or Visnu.

Krsna does not control the truly surrendered jiva-souls by force like a puppet master controls every movement of his puppets  by manipulating strings connected to the puppets, denying self-expression, individual contributions and voluntary service.

However, Krsna does control His pure surrendered devotees by showing them with loving effection and serving them more than they can ever serve Him as reciprocation for their selfless love for Him.

This is why over 90% of jiva-souls never choose to leave Krsna but sadly less than 10% do because free will is part and parcel of the constitutional makeup of each jiva-soul.  

Without free will (where one can choose for themselves) there can never be love.

Srila Prabhupada - "Unless there is chance of doing wrong or right, there is no question of "free will". Where is free will if I can act only one sided? That means I have no "free will". Because we can act wrongly, that means we have free will." (Discussions with Srila Prabhupada on Rene Descartes)

The marginal living entities (jiva-souls) are eternal beings who were never created, nor will they ever cease to be as Srila Prabhupada's Bhagavad Gita As It Is explains *×××*