Determinism vs free-will is always an interesting debate. Let's expand it to include a discussion of God and Karma.
First, I think everyone needs to stop anthropomophizing God. God is not a person like us, who makes decisions for everybody and everything (imho). But that's not my point.
My point is that if you believe in an infinite being, you must not let that being be limited by your own finite perceptions and limited understanding.
Chaos theory says there is a certain randomness to the universe that modifies the order imposed by the laws of physics. This coincides completely with Eastern thought, specifically the Tao, which sees a duality, the yin and yang as two forces that balance each other.
Likewise our awareness informs us of this dual nature of reality and our personal choices determine whether we "go with the flow" or oppose the balance, which causes stress and disease.
Now if God is the omniscient creator of everything, then God has created an infinite range of possibilities from which to choose. What does this mean? It means every second of our lives we act acccording to our awareness and intent, and make free choices among the infinite variety of choices presented. What we choose in one moment determines what we are presented with in the next. All possibilities exist in every moment, in every choice we make.
When we make a choice, our consciousness proceeds upon that path, ignoring and never experiencing the infinite "what ifs" that we have chosen not to follow. Many people believe that these other possibilities do exist, and other versions of ourselves explore those. But having a more finite consciousness than God, we can only experience one of these possibilities in any moment. God by definition must be aware (omniscient) of all these
So our free-will is exercised every moment we exist. We are then responsible (on some level) for everything we experience. Exercising our free-will is simply using that power that God (in Its infinite wisdom) has granted us to experience God's creation according to our own needs.
Do you grasp what this means? It means we have TOTAL FREEDOM to be whatever we choose. But of course with that unlimited freedom comes a load of responsibility. To be truly aware means to understand the consequences of your actions. To be responsible means to accept those consequences, to deal with them in the most aware and reponsible way, and to learn from those experiences. That is how we grow.
So an unlimited concept of God sees that God has created this field of energy for all awareness to play in. Each of us being a portion of God's awareness, following a path of energy over time (an illusion that separates us from God).
On the one hand, this energy field that we exist in is predetermined, yet what games we play in that field is our choice. Therefore the paradox of determinism and free-will is possible.
As I said "What we choose in one moment determines what we are presented with in the next (moment)." So the exercise of free will "determines" what happens to us.
This gives us the power that most infer to God. That is "determinism". But since Time is part of the illusion of Maya that separates us from God, it does not benefit us to think of this as "pre-determinism" since that implies time and lack of responsibility - both of which rob us of power to change the circumstances of our lives.
To me this is a great flaw in the practice of Hinduism (and Islam too), this idea that Karma or (Allah's will) has "predetermined" your whole life and you must accept that. The good part of course is that what you do in this life will improve your circumstances in the next (true). But taking the time factor out, it empowers you to rise above your Karmic circumstances in this life, in this moment (all that really exists) rather than hoping in your next life things will improve.
If you look at Indian (and Islamic) society, you can see that the way Karma is understood (in the past more than today) it is just another tool used by the upper classes to keep the masses under control (and profit from it). The amazing thing is that it has worked for centuries, but the lack of freedom and opportunities experienced by millions is unforgivable.
If we are created in God's image, then it follows that we are made of the same stuff of God (energy/love) and have as much power within and over ourselves as God does with the universe. If you look at the microcosmos, we consist of billions of living parts, cells, bacteria, etc. each with its own genetic code, and perhaps (i do believe), its own consciousness. To cellular consciousness, we must appear to be God or perhaps Gaia. Each cell has free will within its genetic program to behave as it chooses. As long as it goes with flow, it remains healthy. But when it chooses a different course, it gets sick and causes problems (cancer, whatever) that effect the well being of the greater organism.
On the macrocosmic it is the same, we are just the cells in Gaia, Gaia is a cell is something larger. When we fight the flow, it causes stress in our lives which makes us sick and unable to fulfill our programmed functions or our greater potential (and thereby making it more
difficult for the greater organism, mankind and gaia to reach their potential.
So God exists in everything, and our choice is to flow with God's energy to fulfill our and God's potential, or to pursue a different course and work at cross purposes. When that happens we not only hurt ourselves, but all around us. No?
Therefore Karma is not something that exists outside us, but rather something that we reinvent moment to moment, and we can free ourselves as soon as we realize our place in the greater plan.