The central issue in Steve's post seems to be this:
Why is an outcome that God commands a different theodicean problem than the same outcome which God permits? If we already have an adequate theodicy to explain what God allows, why do we need a different explanation for what God commands? The end-result is the same.
Critics of the passage have argued that God's ordering the Hebrews to kill Canaanite children is more deeply problematic than, say, having them all die in a flood, or allowing Joshua to kill them without actually telling him to.
On the other hand, in end-of-life ethics people frequently argue that "pulling the plug" at the request of the patient is justified, while assisted suicide is not. But, as Steve says, the result is the same.