I've rejected the idea of eternal punishment for some time now. I'd been upset over the idea for ages but had rationalised myself into a corner, then I had a bit of an epiphany at the altar rail and realised that it simply wasn't true.
In the same way that the creation story in Genesis is just that - a story, told in terms we can grasp easily - the fabulous imagery in Revelation is a story told within its listeners' frame of reference. The 100 million voices in constant adulation before the throne and the ten-horned beast and Babylon on a sea monster and the pitched foot battle on the plain of Megiddo and the lake of fire are not to be taken literally.
Anyway, it says that Satan and all his angels are also thrown into the lake of fire - so they can't be torturing anyone despite what mediaeval woodcuts might suggest - and that the lake of fire is the second death so it's not an eternal state. Either it extinguishes the souls that wouldn't appreciate heaven or (rather more friendlily) it's the refiner's fire that God is likened to in Malachi 3, along with a bar of soap.
There is a scholarly theory that Revelation is more of a commentary on political events of John's time.
I vaguely remember hearing but don't quote me that the word used to suggest hell in the Gospels (where the afterlife is rarely mentioned) was the name of a rubbish dump outside Jerusalem.
Early Judaism didn't really deal with the afterlife (I think one of the major debates between Pharisees and Sadducees etc was about its nature) - think about how Job's reward is all more goodies in his later life, and the psalmist is continually going on about looking forward to having a better time of it than "the wicked" (who are currently flourishing like the green bay tree, but they'll get theirs, oh yes).
My view of the Incarnation is that God came to discover what it is to be human. Almost as a side-effect of that he also cheated death and laid the path for us to do the same.