The late Fr. William G. Most presents an extremely readable answer to these and countless more problems in his book Grace, Predestination, and the Salvific Will of God, by Fr. William G. Most. I've got to say that it's the most enthralling and insightful book I've ever seen on the topic. You can find the book on Amazon for $20, or from Christendom Press for $16. Catholic Culture carries the entire book in free electronic format here, as well as a short bio of the author and Most Theological Library search engine. Catholic Culture is awesome (it's sort of a Catholic CCEL, but with a better library and easier-to-read format). [Tip of the hat to Fr. Gregory Ned Blevins of the Antiochian "Catholic" Church in America for the book recommendation].
Here's Fr. Most's thesis, with my underlining added:
There are three logical stages in the process of predestination:
1) The universal salvific will, which is sincere and extremely strong.
2) The reprobation of all whom God foresees will gravely and persistently resist grace: Reprobation after and because of foreseen demerits.
3) Predestination of all others, in whom God does not foresee grave and persistent resistance. [The absence of resistance of which we speak is not a positive decision or act of the will made under the form of explicitly making a decision to abstain from sin. Rather, it is the mere absence of an evil decision, without any act of the will in the first part of the process in which grace begins to move a man. This will be explained more fully below in §§82 and 344-350. ]
This decree of predestination is a continuation and positive carrying out of the initial universal salvific will. The cause of this decree is not human merits-up to this stage, God has not looked at human merits, for, in the logical series at which God looks, merits are neither a cause nor a condition-the sole cause of this decree of predestination is the goodness and generosity of the Father who from the beginning wanted to save all and, at this point, actually decrees the salvation of all who do not resist gravely and persistently. No positive condition needs to be placed by man in order that God may predestine, because the strong universal salvific will continues in its course by its own force. A grave condition would have to be placed by man to interrupt the course of this will, but, precisely because this will continues in its course by its own force, nothing is required from man that it may continue, and at the proper point, decree predestination. For without predestination, that salvation which God willed from the beginning and still wills to confer could not be had: Predestination before consideration of merits.
If someone prefers, he could invert the order of the second and third stages.
So in other words, God desires to save all (without anyone having earned it), but He foreknows infallibly that some will "gravely and persistently resist" the grace He is willing to offer. He wishes that they would accept, yet He knows that they will freely choose not to. To make it more clear that those who are saved haven't "earned" their salvation by accepting the free gift of God's graces, he clarifies later in the book, "Insofar as the absence of resistance in the first logical moment is an ontological zero, there is no condition in the man who is predestined."
So Fr. Most (relying in no small part on those who have gone before him, but still posing some fascinating new insights) has successfully synthesized God's universal salvific will with the fact that we can't earn our salvation, and can (and do) earn our damnation.
The book is set up in sections, so you can skip around (much like St. Thomas Aquinas' Summa). It also flows pretty well if you read it straight through, although there's necessarily a bit of repetition (for those who are skipping to a specific section for an answer to a narrow question). The conclusion sections sum up everything that he's said.
The general approach to the book is to first ask: what does Scripture and the Magisterium (in this case, expressed through the Councils of Orange, Quiersy, and Valence) say on the topic? And then he proceeds from there. In his sights are two broad Catholic theological camps -- old-school Thomists (who he thinks inadvertantly misrepresent part of Aquinas' theology) and Molinists (who also deviate from Molina at points). Thomists emphasis predestination much more; Molinists are very into the idea of free will. It's sort of a Calvinist/Arminist squabble writ small, because there are boundaries to how extreme either camp can go, based upon Magisterial teaching. Fr. Most points out the short-comings in both the old Thomist and the Molinist approach, and he advances a view that I think is very nearly flawless. He tsk's both camps for focusing too much on metaphysics and philosophy, and too little on Scripture and the Magisterium.
So yeah. I like his approach and his conclusions. It's definitely changing the way I think about these issues. The two things that I'd mention briefly: (1) this doesn't omit the need to do those works God calls us to -- this calling is a form of grace which is refused at our peril; and (2) just because it takes grave and persistent resistance, doesn't mean that a lot of people won't be in the category. The road to hell is still wide, even if God does a whole heck of a lot to keep us off of it.
As a final point, here's the analogy I would use to sort of create a picture of what Fr. Most's theory looks like:
Imagine God as a painter, who both advertises free home interior painting, and who goes door-to-door offering the same. Some people will let Him come in and slowly transform them interiorly; others may let Him in initially, and then refuse Him (still others, the reverse of that); and others will simply slam the door in His face every time He stops by, until He stops knocking. Since He's God, He packs exactly the right amount of paint, and He has a list with the names of everyone who will accept. But His offer to those who slam the door in His face is genuine. If He wanted to break into their home, He could -- He's that powerful. But He respects their stupid decision, because He loves and respects even them.
Later, when their houses burn down (because they don't have His fireproof paint), they have only themselves to blame. When their neighbor's house remains standing, they have only Him to thank. It isn't like the saved neighbor painted her own house (the works-rightousness position), or even did something admirable by letting God come in and paint (although accepting the gift was undoubtedly wise, nonetheless).
We see His advertising and His handiwork everywhere (Creation, the Bible, the Church, our friends), and we hear Him knocking on our door (Rev. 3:20). But He still authentically gives us a choice. This is best illuminated in a terribly sad verse, as Fr. Most points out:
Similarly, Psalm 80:14* represents God as speaking: "If only my people would hear me, and Israel would walk in my ways. . . ." But again, these words suppose that it really does depend on Israel whether or not Israel listens to God when He speaks. Otherwise God would not say: "If only, . . ." but rather, He by Himself would arrange everything, for it would be a mockery to ask a people for that which is not in some way under their control.*This is Psalm 81:13 in most Protestant Bibles, due to a difference in numbering.