We all expect the Spanish Inquisition to show up sooner or later in our discussions with atheists. Does the presence of the Inquisition in Christian history discredit all of Christianity? Does it render our past completely barbaric?
Here's a question that can help clarify the issues involved with the Inquisition objection: Do you honor Thomas Edison for inventing the light bulb, or do you merely scoff at him for not inventing a computer? Edison explored the same world we explore, and yet he only invented a light bulb. Was he a colossal failure? Absolutely not. Data (in this case, the data of the physical world) takes time to work through, sort out, and apply. Edison had a less than perfect understanding of the world, but he furthered the process of our knowledge and application of the facts of nature by one more step, moving us all towards a more precise understanding of the one reality of nature that has existed since the beginning. Eventually scientific data would lead to computers, but that doesn't mean we can't appreciate the beauty and wonder of the invention of the light bulb in its own time. And even though at the time of the light bulb's creation there were many other false ideas about how to apply the laws of nature (the use of leeches, for example), the false applications did not discredit science for all time.
Now move this same idea away from science and into the realm of morality and Christianity. Like the unchanging laws of nature, we have the unchanging words of God in the Bible. And as in the world of science, in the world of Christianity we've had to work out our knowledge and application of those unchanging words into our societies. This takes time because human societies started off so far from the ideal—with many false ideas and without knowledge of some true ideas of application that hadn't yet occurred to them. (For example, the idea that a pluralistic society could peacefully exist and not tear itself apart looks obvious to us now, but before the cultural situation made the discovery of this radically new idea possible, it was assumed that one must enforce unanimity for the good of the citizens, in order to survive.)
It's no surprise, then, that 500 years ago societies had only reached the moral equivalent of the light bulb and not the computer; but the problem was in the application, not in the data. That is, as inevitably as an application of the facts of the physical world led to computers, so the ideas of the Bible have led to the free societies we now see in the West. But one ought not be surprised by the amount of time it took the societies of the West to work through ideas based on biblical data any more than one is surprised by the thousands of years it took us to work through scientific ideas based on the observable data of nature. Nor does it make any more sense to fault the unchanging Bible itself for those societies' slow pace than it does to fault the always-present laws of nature for our formerly rudimentary ideas about science. The Bible and nature remained the same even if the implications had not yet been fully explored and rightly applied. And, as with the light bulb, we ought to honor the steps that were made in creating better societies rather than merely degrade the people of the past for not creating the inventions and institutions we have today.
But why, we may then ask, when first creating the nation of Israel, did God not immediately demand that they live as we do today? The answer might be similar to the reason why He didn't supply them with computers. A computer would have been completely beyond their grasp. In the same way, Israel had a difficult enough time adjusting their society to what God did give them explicitly at that time. Some things, to be fully understood, accepted, and lived out, have to be reached on our own as we struggle over time, learning little by little. Applications of ideas are discovered and then take time to permeate and transform a society. This, in turn, lays the groundwork for discovering more applications.
What God did do is speak to Israel where they were. He addressed the world as they knew it, and He set a foundation of ideas in place through the Old and New Testaments that would infect societies in such a way that the spread of those ideas would eventually lead us to where we are today. He told us that we're all—men and women—created in His image (Gen 1:27) and equal in value before Him (Gal 3:28, Philemon). We're not to kidnap people and sell them into slavery (Ex 21:16), we're not to punish people in a way that humiliates them (Deut 25:3), we're not to make converts by the sword (John 3:5-8, 18:36), the State is under God and the law (Deut 17:14-20), no one—rich or poor (Lev 19:15), native or foreigner (Num 15:15-16)—is to be favored when justice is dispensed, and the foundation goes on and on.
Unfortunately, just as the lack of good scientific instruments slowed the discovery and application of the laws of nature, our moral weaknesses—stubbornness, ignorance, biases, selfishness, and inherited false beliefs—have made the application of the Bible to our societies a difficult, slow process. This is why the Inquisition, while condemnable, is not unexpected or surprising and so does not successfully argue against the truthfulness of Christianity. And in fact, it gives further witness to the truthfulness of the Bible's central message of our desperate need for Jesus and the forgiveness He provides.