Darkness, no matter how ominous and intimidating, is not a thing or force: it is merely the absence of light.
So light need not combat and overpower darkness in order to displace it. Where light is, darkness is not. A thimbleful of light will therefore banish a roomful of darkness.
The same is true of good and evil: evil is not a thing or force, but merely the absence or concealment of good. One need not "defeat" the evil in the world; one need only bring to light its inherent goodness.
So how do you bring out the good in a pedophile, a crooked politician, a narcissist? The problem with making evil into "unrevealed good" is that it encourages people to just ignore the evil by thinking, "It will eventually just turn to good!" Or people will involve themselves with these people thinking they will draw out that "good", when in reality they will get manipulated by the wicked person who can cause them great harm. We are to " seek justice and correct oppression" (Yeshayahu), not focus on wicked people and trying to dig for their "goodness". Clever advice a wicked person would give to get away with their wickedness, no?
You are correct that you cannot sit back and ignore evil, rather one must find ways to bring out the good, and not allow the evil to remain. Where possible, one must bring a criminal to justice, not only for society's sake, but that can help break the outer shell, and hopefully have them reexamine their ways. That is one of the ways to find the good embedded in a person. Yet, every situation is different, and there is no "one size fits all" approach. Often, it is on a more global scale, where we fight Evil writ large, by doing more good, not by trying to save (or ignore) the individual evil-doer. Please see How Do You Fight Evil? by Tzvi Freeman chabad.org/3217