According to LDS, if the Fall was a positive thing why would God condemn sin in the flesh?

The doctrine of the Church of Jesus Christ of Latter-day Saints is clear:

"Wherefore, the Lord God gave unto man that he should act for himself. Wherefore, man could not act for himself save it should be that he was enticed by the one or the other." (2 Nephi 2:16)

The great purpose of life is to have our character tested. If we were not tempted to sin, we could not prove ourselves nor progress by passing tests of character. Later on in this same chapter we read: "Adam fell that men might be; and men are, that they might have joy."

I was just thinking tonight how merciful God is to let us taste a world in which things do not come easily, and in which there is opposition, including fierce opposition provided by temptation. It grows appreciation in us for the condition of Eden, which we had lost by the Fall. Ask any person, it might have seemed just ordinary then, but it sounds like heaven now, because of our experience!

It is not possible to become like God (or even to be justified in any eternal realm, having received a final judgment from God) without first being tested.

Sin never was necessary. We are never better off for having sinned. We are better off for having confronted temptation to sin, but not having yielded to it. Remember that even Jesus was tempted in all points as we are (see Luke chapter 4), but did not yield to temptation (Hebrews 4:15,16). His being tempted brought glory to His Father and proved the strength of His character because He overcame it. Because apart from the Lord of glory, "all have sinned, and fall short of the glory of God" (Romans 3:23), God sent His Son to atone for our sins and redeem us from our sins. In order to avoid Hell and eternal damnation, repentance of all our sin is necessary:

The Lord surely should come to redeem his people, but that he should not come to redeem them in their sins, but to redeem them from their sins.

And he hath power given unto him from the Father to redeem them from their sins because of repentance. (Helaman 5:10–11)

I am an active member of the church in good standing, but I have some unorthodox views. Just want to put that disclaimer there.

First, I wouldn't go by anything except the scriptures on this. This is a tricky topic, and just because someone has been in a calling to lead the church doesn't mean that they are good at logic. The question you're asking is really one about logical consistency:

The implication seems to be that God actually wanted Adam to sin and then He condemns that which He positively willed to occur

You're asking a logical question about a spiritual topic, so both things are going to enter in to the answer.

Therefore to him that knoweth to do good, and doeth it not, to him it is sin. (James 4:17)

For of him unto whom much is given much is required; and he who sins against the greater light shall receive the greater condemnation. (D&C 82:3)

Running this backwards logically, he who sins against lesser light receives lesser condemnation, and he who sins against zero light receives zero condemnation.

The spiritual culpability of Adam and Eve is very much in question. The idea of calling it a "transgression" (it was, undoubtedly, an action against his express commandment) rather than a "sin" (an act knowingly done against the will of God) reflects that idea (because: was it knowingly done? And was it, ultimately, against the will of God? More below--it could have been consistent with the will of God (i.e. supposing God wanted them to take the fruit eventually) but not done at quite the right time, for example).

The fruit gave them knowledge of good and evil, right? So, previous to partaking of it, they couldn't fulfill the criteria of James: to know to do good (which would involve understanding good and evil, which the fruit they had not yet taken was going to open up to them).

Meta commentary: every statement that implies this whole thing is just a simple case of X or Y is wrong. It's subtle, and nuanced. And almost every, if not every, single discussion I've ever heard ignored the counterfactual. What if, when God came back, he found them to have not taken the fruit?. Does God throw up his hands and say "oh well, I guess mortality isn't going to get kicked off after all?" Does that make sense to anyone?

So, with all this in mind, consider the following scenario. A man and a woman (in modern times, I mean) meet. They feel that their destiny is to be together. They are, in fact, correct, but they don't know how correct--it's God's will that they meet, marry, and have a child, some great things will come of this union. However, suppose they succumb to temptation and conceive that child out of wedlock. God's purposes, I assert, can still be fulfilled with and through them. They can marry afterward. They aren't going to be on as solid a foundation as they would have if they'd obeyed the law of chastity in the first place, but they can repent and things can work out ok in the end. It would have been better if they'd obeyed the commandments, though. But the fact that they succumbed to temptation doesn't mean that God's plan was ultimately frustrated.

So, let's go to the Garden. They are instructed not to eat the fruit. They are not told: that they will never be instructed to eat the fruit. They are not told: that it is against God's will for them ever, ever to eat the fruit. They are forbidden to partake of it, and warned that they will die if they do. It doesn't say: that partaking of the fruit is inherently evil.

Now, Satan is attempting to disrupt God's plans in any way he can. Satan may know that God is coming back and that God would prefer that his instructions were followed. God's intentions may be this: see if they have adhered to the commandment. If so, tell them, "good job." Tell them that Satan is a deceiver, that some of the things he said were true, but others were not. Satan said that they wouldn't die, but that is not true. He said they would be as the gods, knowing good from evil, which was true but not maybe to the extent he implied it. They are then commended for following the commandment/instruction. Then, God explains to them that there is only one way for them to fulfill his command to multiply and replenish the earth. They will need to take the fruit and become mortal. Life will become difficult, but it will give them opportunities for growth. And they will be able to have children, which, again, will give them both sorrow and joy. So, the next phase of the plan is that God leaves and they are aware that they have this option and what it means to take it. And maybe Satan comes back and tries to convince them to stay in the garden--again, trying to thwart God's plan any way he can.

We don't know, because we don't have the counterfactual. The idea that God would rely on something bad happening in order for something good (our experience of mortality) to happen just doesn't make sense. (Aside: Even the idea that you have to have had Lucifer rebel in the premortal life or the plan would have been frustrated is, in my opinion, false. Small thinking. You can't imagine God having a plan in place in the case that everyone signs on and no one rebels? How about this: everything else happens the same, but God turns up the difficulty level on the planet itself and we have more temptations simply from the difficulty of living as mortals on a planet with harsh conditions. We can still be enticed by the dark side--giving in to animal urges, losing faith, etc, without an active antagonist.)

I assert that God is able to work with anything we or any other spirit or mortal throws at him. We really need to not think so poorly of God that we believe he couldn't figure out a way for mortality to commence if Eve resisted Satan's persuasions nor if Adam resisted Eve's persuasions. If Adam had not partaken, couldn't God have come back and said "ok, well, your woman here is going to become mortal--this isn't the most ideal sequence, but I'm giving you the option here--do you want to let her go out of the garden and live and die alone, or do you want to go with her? If you go with, the way to do that is to take this fruit, and it means you will also become mortal." And then Adam would have made a choice. I'm not even sure what the right choice would be, probably going with Eve? But suppose he doesn't. Does God just not know what to do? No. Maybe Adam never chooses to leave the garden. Is it impossible for God to create, say, another man? Keep doing so, until one chooses to start the process of mortality? If that's impossible, please explain to me, why? What is it about God that limits him from making another man, maybe this one will be more moved by Eve's plight; making Adam another woman if that's necessary; and, in general--respecting the agency of every single entity involved?

Going back to the hypothetical couple from before. They are still going to love their baby. Good things are still going to happen. It was intended that they come together and have a child. It didn't come about in the most optimal way. What, in your life, have you ever done in the most optimal way?. Perhaps that is the actual lesson we're supposed to learn about the Fall--that Satan will try to thwart God, that we're likely to stumble along the way, but that God always has an answer, his plans are bigger than we imagine, and that we can come back from anything (through the Atonement of Christ) if we repent.

I don't mind if this doesn't convince everyone--but I assert that you can believe this and be completely in line with everything in the scriptures. If you, like me, believe that God is a good being that behaves, in every instance, with love toward us, then believe in this doctrine in a way that is consistent with that truth.

Finally--if I, a random member who thinks a lot, can come up with all these possible scenarios, and ways for God to move the plan forward, don't you think that God has a bunch of better ideas? I am pretty much certain that he does :).

Sin--knowingly acting against the will of God--is never necessary for God's plans to move forward. Every possible contingency will have been thought of, even the case where nobody sins. Every one. You don't have to know what all those plans were/would be in order to know that he can, and did, figure them out, and had every single one of them ready for every possible contingency.

Before getting to LDS doctrine about Adam and Eve it is essential to know of some other teachings prior to the Adam and Eve Genesis account.

One is that man (including Adam and his wife) had a pre-existent (spirit) life and that mortal life in a physical body was necessary to become god-like (see Theosis):

In the premortal realm, spirit sons and daughters knew and worshipped God as their Eternal Father and accepted His plan by which His children could obtain a physical body and gain earthly experience to progress toward perfection and ultimately realize their divine destiny as heirs of eternal life. (source)

Thus God commanded Adam & Eve to procreate (see Genesis 1:28, Moses 2:28 & 2 Nephi 2:20). The LDS principle of exaltation details all of that. This question is about why 'the Fall' was necessary in the LDS estimation of matters. The quotes from official LDS links below answer that.

Orthodoxly Christian doctrine on sin and 'the Fall', and LDS teaching, are quite distinct here. This can be seen by examining these two links:

The 1st one is with regard to Adam's pre-mortal existence (the point I made at the start) and why he and Eve had to leave the Garden - https://www.lds.org/study/ensign/1998/01/what-modern-revelation-teaches-about-adam?lang=eng

“…Adam and Eve were taught the gospel long before they were in Eden. Indeed, life before Eden was obviously a time of preparation for their important ministry. In the premortal realm, Adam was known as Michael…

The implications of the Fall are often misunderstood in the contemporary world. One misperception the world has about the transgression of Adam and Eve is the concept of original sin…

Our Father in Heaven knew Adam and Eve would fall. In fact, the Prophet Joseph Smith taught that Adam “was made to open the way of the world” (Teachings, 12). Lehi tells us, “Adam fell that man might be; and men are, that they might have joy” (2 Nephi 2:25). Modern scripture makes it clear that it was the will of the Father, as part of his plan, that Adam and Eve transgress and thus be moved out of Eden…

By wearing their coats of skins, they would be reminded that the Atonement covered their sins.” [There’s a helpful summary list at the end of the article.]

The 2nd one is also about pre-mortal existence and that Adam's transgression was necessary, but that it wasn't a sin - https://www.lds.org/study/ensign/1998/01/in-the-beginning-a-latter-day-perspective?lang=eng

"We know that there was a council of the Gods in which the plan of our Eternal Father was sustained... This plan presupposed that Adam and Eve would fall from the Garden of Eden, so it provided for the Savior (see Alma 34:9-10, 14-15), a mediator who would provide the means whereby we could succeed in this earth-life experience and return to our Father in Heaven prepared for the next phase of our development (see Alma 12:24). …

President Joseph Fielding Smith wrote: “It is true that Adam helped to form this earth. He labored with our Savior Jesus Christ. I have a strong view or conviction that there were also others who assisted them. Perhaps Noah and Enoch; and why not Joseph Smith, and those who were appointed to be rulers before the earth was formed?...

Some even erroneously think that Adam and Eve’s transgression was sexual in nature. They assume that none of the general conditions we find on earth now would ever have come if our first parents had not been sinful… In contrast to most readers of the Bible, we believe that Adam and Eve both should be commended for what they did to bring about the Fall. We understand that without the Fall none of us could have come to the earth and the whole plan of salvation would have been frustrated (see 2 Nephi 2:25). …

The Prophet Joseph Smith referred to their choice to eat of the fruit as a “transgression,” not a sin (Articles of Faith 1:2). Similarly, Elder Bruce R. McConkie of the Quorum of the Twelve Apostles explained: “It is proper and according to the scriptural pattern to speak of the transgression of Adam, but not the sin of Adam. (D. & C. 20:20; 29:40 Second Article of Faith)… Knowledge of good and evil is an essential element in the commission of sin, and our first parents did not have this knowledge until after they had partaken of the fruit of the tree of knowledge of good and evil. Thus, by being required to leave the Garden of Eden, Adam and Eve caused the great plan of happiness to go forward. Mortality came to all living things; procreation began the process of bringing us, the sons and daughters of God, to earth as Adam and Eve’s posterity.”

These quotes show why the LDS can claim that 'the Fall' was a positive thing, and that Adam did not 'sin in the flesh', although he 'transgressed' - but necessarily so, without which the whole plan of salvation would have been frustrated. As I said earlier, orthodoxly Christian doctrine on sin and 'the Fall', and LDS teaching, are quite distinct.