It’s a great question about God and time. However, I honestly do not recall MacDonald talking about it at length; and am aware only of a very brief mention of time in his very last sermon, The Hope of the Universe:
"Is there a past to God with which he has done? Is Time too much for him? Is he God enough to care for those that happen to live at one present time, but not God enough to care for those that happened to live at another present time?"
But there is nothing else of a substantive nature that I can think of in any of his sermons or non-fiction writings specifically about God and time. In one sense, however, your question raises the larger issue of free will.
C.S. Lewis, of course, is often quoted about time. The entire last section of Mere Christianity is about God and time. And much that he says is brilliantly incisive. As much as I love Lewis’s writings, however (Mere Christianity is one of my two favorite books that, along with A Testament of Devotion, I have read more times than any other), I do think there is a dangerous trend toward “Lewis worship” in our time. He is looked upon as a sort of literary Protestant “pope,” and invested with an infallibility that is as absurd as it is unfounded. Lewis himself would be the first to condemn the pedestal that has been erected beneath him, and probably in the strongest of language. Lewis’s humanity and opinionated wise-cracking snobbery toward anyone who disagrees with him hangs out all over the place…which is what makes him so loveable! But infallible he is not.
All this to say that I’m not sure Lewis is right in declaring in no uncertain terms that God is outside of time altogether. He may be—I don’t know. It is a conundrum that simply makes my brain go “tilt” when I try to think the question through to its logical conclusion—in other words, to the beginning of time, and how God has no beginning and has always existed. Yet I think you may be onto something when you say that God does exist in time. Your reasoning makes sense to me.
Of course, these are high questions! The reality is probably some eternally incomprehensible combination of both perspectives. God obviously works in time and in the creation, as you say. Yet if he has no beginning, he is just as obviously above and beyond and outside time too. The question is then raised whether, if God IS in time (I AM) in some incomprehensible fashion, is he also subject to the constraints of time? One of the most fascinating books I have ever read (many years ago, and I have never been able to find a copy again) was a self-published book that dealt tangentially with this entitled Did God Know? In other words, can God see ahead in time? If so, where are the limits (perhaps self-imposed) to his sovereignty in having a hand in controlling events, allowing some things to happen and (if his sovereignty is total) preventing other things from happening?
I have no answers, but I find the conundrum fascinating. Thinking about all this in recent years has prompted a great deal of reflection on my part into the nature of God’s sovereignty at a fundamental level, and whether or not there are boundaries or limits to God’s sovereignty? Are there some things, even in God’s sovereignty, that he simply will not do, prayers he is constrained by his very nature NOT to answer? These are lofty queries! If I pray selfishly, obviously God’s love demands that he not answer my prayer. (Or, as the saying goes, “Sometimes the answer is No.”) But are there also times when God does not step into human affairs even though most theologies would allow that his sovereignty would make it seem reasonable that he would do so. In other words, why didn’t God stop Hitler, and why does he allow the slow takeover of the world by Islam?
In the end, it seems to me that your question raises the fundamental confusion to Christians and non-Christians alike: Why does evil persist in the world when we say that God is all-loving, all-powerful, and all-sovereign?
Yet if God could have stopped Hitler…why would he allow a corrupt law breaker like Hilary or a blowhard like the Donald to become President? But if he could prevent those things…why would he allow a man to beat his wife? And if he could prevent that…why would he not stop all men from beating their wives? And if he could do that…why doesn’t he just make everyone good and incapable of sin? And at its most basic, why doesn’t God make ME a perfect person?
One might argue on the basis of the “degree of wrong”—Hitler’s being worse than the rest. But then you are back to Abraham’s argument with God about how many righteous souls would make Sodom worth saving? The question of “degree” boils down to: “Where does God draw the line between where he will or will not exercise his sovereignty to intervene in time and creation and in the affairs of sinful man?”
The conclusion is almost inescapable that for God to allow ME my free will requires that he allow all men free will…leading to the conclusion that he must therefore allow the entire creation and all of humanity and human history its free will. The very fact that I possess free will and am capable of choosing good or bad a hundred times a day requires, by logical extension, that a Hitler or ISIS must be allowed to exercise that same free will on a much larger scale. Where does God draw the line…where will he interfere with free will…where will he step into time? Does he ever step in and interfere with free will?
I said at the beginning that I did not think MacDonald addressed this. But one of my very favorite passages in the entire MacDonald corpus is found in David Elginbrod, in the chapter entitled A Sunday With Falconer. MacDonald writes: “Does God draw no lines, then? When he does, they are pure lines, without breadth, and consequently invisible to mortal eyes.”
I wonder if he might have had any of these things in mind when he wrote that! In my years of acquaintance with George MacDonald, though he found many thorny ideas fascinating and was bold to explore them, at the end of the day he always came back to the truth that God is a good Father, and the injunction upon us all to do what Jesus said.
Don’t know if this will stimulate your thoughts and prayers in any helpful directions, but it has been energizing for me to reflect on these things again.