Praise be to Allah.
You should note that all the kaafirs who hear the message of the Prophet (peace and blessings of Allaah be upon him) and do not enter Islam will go to Hell. Allaah says (interpretation of the meaning):
“Verily, those who disbelieve (in the religion of Islam, the Qur’aan and Prophet Muhammad) from among the people of the Scripture (Jews and Christians) and Al-Mushrikoon will abide in the fire of Hell. They are the worst of creatures”
The Prophet (peace and blessings of Allaah be upon him) said: “By the One in Whose hand is my soul, no one of this nation, Jew or Christian, hears of me then dies without having believed in that with which I was sent, but he will be one of the people of the Fire.” Narrated by Muslim, 153.
The point is not whether their morals are good, rather the point is whether they submit to Allaah and obey his commands. Do you not see the Magians [Zoroastrians] or the Buddhists, for example, who worship fire or idols instead of Allaah, and they do not worship Allaah or submit to Him alone, and the Christians who say that God has a son, and other mushriks (those who associate others with Allaah). They are being ill-mannered towards Allaah, and insulting and reviling Him. The Prophet (peace and blessings of Allaah be upon him) said: “Allaah says, ‘The son of Adam denied Me and he had no right to do so. And he reviled Me and he had no right to do so. As for his denying Me, it is his saying: He will not remake me as He made me at first - and the initial creation [of him] is no easier for Me than remaking him. As for his reviling Me, it is his saying: Allaah has taken to Himself a son, while I am the One, the Everlasting Refuge. I begot not nor was I begotten, and there is none comparable to Me.’” Narrated by al-Bukhaari, 4974.
So how can their morals be good when they are so ill-mannered towards Allaah, even though Allaah has given them hearing and sight, and has made everything easy for them, and has sent His Messengers to them and revealed His Books to them, and bestowed His blessings upon them, so it is His right that they should thank Him and not be ungrateful to Him or disbelieve in Him. If they do not do that then they deserve His punishment and wrath. Allaah says (interpretation of the meaning):
“and your Lord treats no one with injustice”
With regard to the situation of their children who die when still young, Shaykh ‘Abd al-‘Azeez ibn Baaz was asked about that and he said:
If one who is not yet accountable dies among kaafir parents, then he comes under the same rulings as them in this world, so he should not be washed and the funeral prayer should not be offered for him, and he should not be buried in the Muslim graveyard.
But in the Hereafter his case is referred to Allaah. It was narrated in a saheeh report that when the Messenger of Allaah (peace and blessings of Allaah be upon him) was asked about the children of the mushrikeen he said: “Allaah knows best what they would have done.” Narrated by al-Bukhaari, 1384.
Some of the scholars were of the view that Allaah’s knowledge about them will be made manifest on the Day of Resurrection, and that they will be tested, as will the people who lived during the fatrah (interval between two Prophets) and others. If they do what they are told to do then they will enter Paradise, and if they disobey then they will enter Hell. There are saheeh ahaadeeth from the Prophet (peace and blessings of Allaah be upon him) which say that the people who lived during the fatrah (interval between two Prophets) will be tested on the Day of Resurrection. These are the people whom the call of the Messengers did not reach and those who come under a similar ruling, such as the children of the mushrikeen, because Allaah says (interpretation of the meaning):
“And We never punish until We have sent a Messenger (to give warning)”
This is the most correct view among the various opinions concerning the people who lived during the fatrah (interval between two Prophets) and others whom the call did not reach, and it is the view favoured by Shaykh al-Islam Ibn Taymiyah and his student Ibn al-Qayyim, and a number of the earlier and later generations.
Majmoo’ Fataawa wa Maqaalaat Mutanawwi’ah, 3/163-164.