According to the Westminster Confession when God created all, it was all was good.
However, you raise a good point and it was the one that caused me to eventually walk away from Calvinism.
I was always impressed by Calvinistic scholars' ability to articulate their views on the Bible. However, even the best do mental gymnastics when it comes to this question: How can God predestine some for mercy and others for reprobation?
The answer is always a matter of that God foreknew that all would sin and calls the elect out of the sin that God knew they would fall in. All others, Calvinists say, simply remain in their sins, justly condemned by God. In this, they say, God is just, because He doesn't force anyone to sin.
However, your question points out what I've always believed to be the fatal flaw of the argument: That because God knew beforehand that all would sin, by creating man, knowing that man would fall, and predetermining that He would extend His mercies only to some and never to others, He most certainly created beings that have never, since before creation, ever had the hope of salvation.
Now, one can argue, and believe me, I've heard the arguments, that in this, Calvinism isn't any different from Arminiansm, because even Arminians will admit that God knew, before He created the world that man would fall and most of mankind would be doomed to hell.
But, the difference is that in Arminiansm, man could choose God. Man can answer God's call to salvation. His fate wasn't sealed prior to the foundations of the world.
However, I believe that Arminiansm fails because it places our salvation in our own hands, each individual being required to either accept or reject God's offer of salvation. If this were true, then the bible clearly teaches us that we all are so depraved by our sin, all would surely reject God.
I tend to agree with Luther on this subject: That God does indeed divinely elect those who come to know Him. We are just too entrenched in sin to choose salvation. But, I also agree with Luther that we should not then jump to what seems to be logical conclusions that God therefore fore-ordained all others to eternal damnation by not offering salvation to them as well. Luther held to unlimited atonement, that Christ's death was for the atonement for all mankind, but that only those to whom God elected would the atonement be efficacious. As for how God's sovereign will worked towards the reprobate...again, one of the things I like best about Luther was the man's ability to be able to say, "we are not allowed to investigate, and even though you were to investigate much, yet you would never find out."
* In other words, we can't know and it's futile trying to figure it out. Which, considering that, after 500 years of wrangling back and forth on the issue, it still hasn't been resovled, I conclude that Luther was right. The dichotomy between the very biblical based doctrine of election and the equally, yet seemingly paradoxical, doctrine of God's unlimited atonement and offer of mercy is a mystery and will remain so, at least on this side of eternity.
* Martin Luther and the Doctrine of Predestination - by Don Matzat