Muspelheim exists before anything else except its opposite. The account begins with Ginnungagap, the yawning void, with ice and mist to the north and fire to the south, and creation happens where the two meet and the ice begins to drip. Nothing made it and nobody rules it except Surtr, who stands at its border with a flaming sword and who will come at the end to burn the world.
The word itself is the puzzle. Muspell appears in Old High German and Old Saxon Christian poetry before it appears in Norse, in contexts about the end of the world by fire, and the ninth century German poem called Muspilli takes its modern name from the term. Whether Norse borrowed a Christian apocalyptic word for its own fire realm, or whether both drew on something older, is argued and unresolved. It is one of the clearest cases where the Norse material can be shown to be in contact with Christian writing rather than sealed off from it.
The structural point is that this cosmology is not a creation from nothing. It begins with a polarity and a gap, and everything else is what happens when the two sides touch. Fire is not evil in it. It is one of the two conditions the world requires, and it is also the condition that will end it.