With such questions, it sometimes helps to think about our own selves and how we behave in this world. That can give useful insights on the Divine. There is a narration along the same lines that states that "Whoever knows himself knows his Lord".
So in that vein, let's think about a few realities of this world. We are on a rock that is spinning at a certain speed and revolving around the sun at a certain pace, while keeping a certain distance from it. We are alive, as biological creatures, because of these facts. Everything we do, even the atmosphere we breathe, exists because of such uncontrollable facts.
The fact that we can even drive a car on a motorway is a function of these and other uncontrollable facts, such as the various laws of physics and chemistry. Think speed, inertia, the combustion of fuel.
We didn't get asked about these laws and rules, and we don't seem to complain about them. We just accept them as, quite simply, laws of nature.
However, in such a world, we find we do have some choices.
So now let's go for a drive on this motorway. Imagine you pick up pace in your car and get to a nice comfortable speed suitable for a motorway. You are probably cruising along, chatting to others in your car, listening to a nasheed. Happy and content.
Now imagine what would happen if you suddenly, for no reason whatsoever, decided from your own free will to twist that steering wheel around!
Death, destruction, both of your own vehicle and several others who are unable to avoid collision with the maniac who did that.
The impact of that crash is a result of the laws of physics, obviously. And chemistry - the fuel tank blows up. And biology - the fragile human bodies cannot survive the impact.
At this point, do you feel the laws of physics, chemistry and biology that govern your lives are unfair and should have been different?
Isn't it true that we take those uncontrollable facts as a given, unchallenged, and would place total blame on the terrible exercise of free will of the driver?
Why don't we feel the same way when we think of Divine laws? The horrific punishments are simply laws having their consequences when the driver on the motorway of life decides to do crazy things despite being warned not to do so by the Creator who set the rules.
Remember that there was no fear when you were on that motorway. Just a clear and constant awareness of the rules and the boundaries.
And just as the laws of nature in this world are there to nurture life here, the Divine laws of religion are there to keep us in the correct lane so we reach the right destination in the afterlife.
There is no need to be fearful of God in the meaning of being terrified and scared. But rather being in a state of awareness of the Divine rules and boundaries. And that is called Taqwa.
And there is no contradiction with God's Love or Mercy. The fact that He created us with free will so we can navigate His path, and then sent Books and Messengers, is a sign that He loves us and wants us to succeed.
I wish you a safe and pleasant journey, but do drive carefully :)
