On free will [part 1]

Here is a nice thought experiment:
Imagine this person calle Joe. One day Joe makes a mistake that has grave consequences, let's say he blows up the Earth. Joe, who apparently was not on Earth when this happened, obviously did regret it very much, but what could he do? Well, as luck would have it, on the very same day he found a completely functioning time-machine! Now he could just go back in time and not do the mistake that destroyed Earth!
Well, as it turns out it is not that simple. For this is not the kind of time-machine that send things through time; it merely restores everything, including Joe, to the state it was one day ago. It restores the world to how it was before Joe blew up the world without introducing any changes.
Now, imagine looking at time through the eyes of a being that stands outside of time, like God or Santa Clause. Such a being would observe exactly one out of two things:

A. Either the day will play out exactly the way it did before with no alteration, meaning he did the mistake, blew up the Earth and restored time once again to have the whole thing play out again, and the loop would continue eternally.
B. The day would play out differently, if only a little, and even if Joe failed to prevent the mistake at one point, each time will be a little different, and the loop will continue only until he either won't make that mistake and saves the Earth, or he screws up so bad that he kill himself as well.

Now, my question is this; in which of these cases does free will exist?
Not in A, obviously. In the case of A, he was always going to blow up Earth. It was an inevitability, the result of the natural progression of the universe. It would be impossible for him not to make the mistake! How can you blame him if he himself could not help it?
So B then? Well, I'd have to say no, because every time he resets time there is a chance he will blow up the Earth, so whether or not he ends up in that universe is completely up to luck. Is it really fair if God throws dice and says "Oh, I'm sorry. It looks like you will commit a double murder today, by your own free will"? Of course it isn't!

So if these events play out, free will does not exist? Is it safe to say that free will never existed in a world where such events are possible? Is it possible then that free will is an illusion in the world we live in now?

What I would like to take from this is that what we call free will seems to be contradictory in nature, but I am not quite sure what the contradiction is.

Of course, I really don't think it is quite this simple, but I will adress those issues in the next post.

TO BE CONTINUED!