We know that Yishmael early on acted in an improper manner (see for example Bereishis Rabbah 53:11) and was resultantly banished from Avraham's household - Bereishis 21:9-10
However, we learn later on (Bereishis 25:9) that following Avraham's death, Yishmael returned to bury his father along with Yitzchak. Rashi there qualifies this to mean:
יצחק וישמעאל. מִכָּאן שֶׁעָשָׂה יִשְׁמָעֵאל תְּשׁוּבָה וְהוֹלִיךְ אֶת יִצְחָק לְפָנָיו, וְהִיא שֵׂיבָה טוֹבָה שֶׁנֶּאֱמַר בְּאַבְרָהָם (בראשית רבה):
ISAAC AND ISHMAEL — From this we gather that Ishmael repented of his evil ways (cf. Bava Basra 16b) and yielded the precedence to Isaac. This is what is meant by the “good old age” mentioned in connection with Abraham (Bereishis Rabbah 38:12).
With this in mind, how then do we understand the pretty tough line we see in a couple of places against Yishmael:
- Sanhedrin 104a - Avraham cannot save Yishmael (from his heavenly judgement)
- Pesachim 119b - In the future Hashem will make a feast for the righteous. The cup of blessing will be given to Avraham (so that he can lead bensching) but he will say, "I will not recite the blessing because Yishmael issued from me."
I appreciate Yishmael gave rise to a nation that would be an enemy of the Jews, but on an individual level why should he continue to warrant punishment if he was chozer b'teshuva?