In my opinion, Shylock is not innocent, but neither does he deserve everything that happens to him.
First of all, it's not like Shylock went out and tried to destroy Antonio for no reason. They are adversaries and Antonio has criticized Shylock for lending money at interest (perhaps there's some anti-Semitism going there too, which would give Shylock a reason to be angry).
Second, no one forced Antonio to make the deal for the pound of flesh. It was pretty dumb of him, if you think about it. Shylock shouldn't have proposed it, but Antonio shouldn't have taken the risk.
Finally, all the stuff that happens to Shylock is excessive. Does he deserve to have his daughter run off (having first stolen valuables from him)? That seems harsh. Does he deserve to have half his wealth taken away? Does he, above all, deserve to be forced to abandon his faith? The loss of the money seems appropriate, but the others do not at all.
Shylock is greedy and he hates Antonio, but those are not such terrible things -- not terrible enough to warrant the loss of his daughter and being forced to abandon his faith.