I led them with cords of human kindness, with ties of love; I lifted the yoke from their neck and bent down to feed them. "Will they not return to Egypt and will not Assyria rule over them because they refuse to repent? Swords will flash in their cities, will destroy the bars of their gates and put an end to their plans. "How can I give you up, Ephraim? How can I hand you over, Israel? How can I treat you like Admah?How can I make you like Zeboiim? My heart is changed within me; all my compassion is aroused.
I will not carry out my fierce anger, nor will I turn and devastate Ephraim. For I am God, and not man— the Holy One among you. I will not come in wrath. [c]
They will follow the LORD; he will roar like a lion. When he roars, his children will come trembling from the west.
They will come trembling like birds from Egypt, like doves from Assyria. I will settle them in their homes," declares the LORD.

Does that mean he wouldn't punish them?

The LORD has a charge to bring against Judah; he will punish Jacob [a] according to his ways and repay him according to his deeds.

Now this is getting really confusing.It seems that in all those chapters He talks about destroying them - then he has compassion, then he goes back to saying how much Israel has sinned.

But you must return to your God; maintain love and justice, and wait for your God always. The LORD used a prophet to bring Israel up from Egypt, by a prophet he cared for him.
But Ephraim has bitterly provoked him to anger, his Lord will leave upon him the guilt of his bloodshed and will repay him for his contempt.