Was it cruel of God to create people who He knew would be condemned?

Of course, as we might expect, it wasn't meant to be literal, as though there were some objective weighing of Judas' life proving things would have been better had he not been born. Cursing one's own birth, or that of others, was a common metaphorical lament used for or by someone experiencing great distress or woe, both in Jewish and pagan literature (see for example Job 3:3-26). There is even a rabbinic saying that anyone whose first words upon waking are not from the Torah is better off not having been born.

Obviously this concept had the status of a metaphor to indicate the experience of something tragic or awful, or else to pronounce judgment. Even to this day we use the same metaphor; Napoleon reportedly said, for example, 'Better not to have been born than to live without glory.'