Post #2 offers a nicely concise synopisis of the dilemma proposed by this question. It seems that Lennie has no free will and is fated to act according to his nature. He will kill someone. It's only a matter of time until he does (or until he does it again, depending on how you read the "up in Weed" story).
George, however, is apparently the master of his fate. He may be bound to Lennie's actions and so fated or pre-determined to rectify the Lennie's crimes, but it is much harder to read George's (or Slim's) character as being subject to a determined fate.
That is why the novel's outcome is so agonizing. George has to choose to shoot Lennie in accordance to Lennie's fate.
I have to agree with bmadnick unfortunately. Part of the tragedy of this bleak, harsh world that we are introduced to is that we know from almost the opening paragraphs that Lennie is doomed to die. Someone like him cannot continue to survive in this world, and it is only a matter of luck that he is done so well and for so long. Remember that they have already had quite a few close escapes which have necessitated their swift removal from the vicinity, so Lennie´s fate is definitely on the cards.
Greg, I agree. But I would also argue that, despite the fatalistic ending, Steinbeck is encouraging free will. He is encouraging the continued struggle against the trappings of society, as demonstrated by Candy and George. It is the bitter characters who fail to be sympathetic in the story - the dreamers get the edge.
One of the things that makes this work tragic is that Lennie and George (and all the rest have complete free will…and it doesn't matter. Lennie's free will is limited by his capacity, and by his literal strength. He chooses everything he does, and freely, and it doesn't matter. He can't understand things, and he isn't sharp enough to realize he's killing. So, while he does interact with this environment, it almost doesn't matter; it is the site of his personal tragedy. It would always have happened.
Lennie's fate is sealed from the beginning. You know from the time you're introduced to him that it's just a matter of time before he goes too far. Many of my students are surprised that George must shoot him in the end, but they aren't shocked when he accidentally kills Curley's wife. Because Lennie's fate is sealed, so is George's. I think George recognizes it in the recesses of his mind, but he tries to keep it embedded, hoping that their dream can come true.