A lot of argument about that.
Most Jewish ideas about the afterlife developed in post-biblical times. The Hebrew Scriptures themselves have few references to life after death. Sheol, the grave, is portrayed as the place of the dead, but Sheol is a metaphor for oblivion and not an actual place where the dead “live” and retain consciousness.
You are talking about apples AND oranges. Let me try to separate them.
Hebrew/Christian scriptures use sheol pretty much as you describe.
Jewish ideas were modified in Babylonian captivity and later. The Talmud became the basis for Judaism. Ideas of eternal punishment were taught in Sumeria, Babylon, pre-Christian Greece etc.