It is truly sad, my friend, that you have to deal with misguided people who believe their religiosity is enough to countermand the Greatest Command(ment): "To love God with all your being, and then to love your neighbor as yourself."
Your family's views are unequivocally wrong. Acting upon homosexual desires, like all other choices we make, is a personal choice; so long as no one is being forced to do anything, and the object of one's desire is sexually mature (each society must define that, itself, but let them be adults, respect their choices, and help them understand the situation), there is no sin there that I know of, except for, perhaps, a bit of greedy waste of sexual energy, but that is ubiquitous, AFAICT.
No, what makes a person deserving of hell is to disregard the happiness of others, or to even cruelly create unhappiness via oppression. We are to love one another, not judge them for their personal choices. Besides, it looks to me like many, or perhaps most, gay folks were born that way, in the same way we understand the biology of trans folks' brains likely differ in ways that are counter to "normal" sexually dimorphic structures (Dr. Robert Sapolsky details this in his freely available Human Behavioral Biology class from Stanford). Regardless, one's sexuality (and gender identification) is one's own business, so long as what we do is consensual with other adult participants.
No one is truly practicing religion if universal compassion is not the teaching or the goal. Of course, liars and hypocrites and the willfully ignorant say otherwise, but what they say doesn't count for sh_t. You can identify them because, beyond their ebullient, self-satisfied faces of perceived self-superiority, they are deeply unhappy and very likely to have no power over their own demons. Such is the fate of the cruel hypocrites. When we sow unhappiness, that is what we reap.
I disagree with your last paragraph, though. There is only one kind of compassion: gentle, kind, and respectful (at least to some extent), and it is not any one religion's purview to determine it. It is a human potential, and a human requirement, required for our personal and societal evolution towards peace and happiness, each and every one of us. Anyone who tells you "their" compassion is special or solely of one path or another is just another over-confident fool who has been deceived into believing their false sense of self-superiority. That way is the way of the oppressors, the tyrants, and their followers who cause so much mischief and misery in this world.
But, no, there is no compulsion in religion, so it should never be baked into any govt, but we can and should bake fairness in regulations regarding taxes, income reporting, and even minimum and maximum wages, so that the whole of society is, if not benefitting, at least not harmed by their commerce. No company can operate without either the consent of the state or this world's entire cultural and technological apparatus. We can at least ensure that their profit is not wholly destructive.