On the subject of redemption (and god, I may be opening a can of worms here) the objectives of punishment are surely:
1. To bring the sinner to the point they sincerely say they regret their sin and will not repeat it
2. To deter others from doing the same

Given that the Seraphim Council can literally see Lucifer's soul it seems likely that they can determine that point 1 is concluded. Lucifer has been punishing _himself_ for eons.

On the second point, Lucifer spent eons in hell. He rose to the grandest power and position there and held it for all that time. And yet he is walking away and submitting himself to his enemies. A grander statement of _this shit ain't worth it_ is hard to conceive.

Extending forgiveness and reinstatement under these conditions seems to have merit on three grounds:
1. As a matter of practicality, it may lead to other demons seeking redemption for their sins.
2. Putting Lucifer back on the Seraphim Council is putting him back to work. He's not lazing on a cloud for eternity being adored, whatever some of the footsoldiers think being on the Council is like.
3. Further punishment would essentially be hurting Lucifer for the sake of gratifying the vengeful. One hopes the Seraphim Council are above that.