Shylock most certainly is a victim, more sinned against than sinning.  The play which is often misunderstood as anti-semitic points up the fact that he is trapped into a cycle of vicious usury by the culture of the time that locked Jews into it.  The hypocritical gentile rule against usury was circumvented by exploiting Jews as money lenders and then blaming them for its wickedness.    

See my forthcoming new edition of The Merchant of Venice (Venice, Marsilio, 2016), unfortunately, in Italian. I think I give detailed evidence, in a long introduction and in 50 pages of notes, of the relationship between Shylock and Venetian/Christian society. Trying, however, not to mix up fiction with history (and the history of the Jews in Venice, in particular, which is something else).

If by "hero" you mean someone who is to be admired for courage, outstanding achievements or noble qualities then no. Shylock is not to be admired in that way. One can perhaps have some sympathy with him, given the way the system is stacked against him, but one cannot admire him, nor is one intended to.

Shylock's bond with Antonio is a common law contract, illegal by its very nature. His motivation in drawing up the bond is revenge:

"if you wrong us, shall we not revenge? If we are like you in the rest, we will resemble you in that. If a Jew wrong a Christian, what is his humility? revenge: If a Christian wrong a Jew, what should his sufferance be by Christian example? why, revenge."

An underlying theme in Shakespeare is that revenge - taking the law into one's own hands - is wrong. Here he criticizes Christians for failing in their moral duty to uphold the law and not take it into their own hands to administer justice. Shylock may not be a tragic hero, but he is not an absolute villain either; it's not that he's so bad, but that the Christians are no better than he is.

As an aside, one supposes that, even if Shakespeare had had in-depth knowledge of the situation of Jews in Venice (which is debatable), the subject would not have been of any particular interest or immediacy to his audiences, and Shylock is perhaps more reasonably understood as a covert attack on puritan covenantal values than on Judaism.

There's an outline of this thesis, drawing heavily on the work of my (retired) colleague Peter Milward, here: http://staustinreview.org/2014/10/13/shylock_the_puritan/

I don't agree with everything Professor Milward says, by any means, but I think he is basically right about Shylock.

The Merchant of Venice is a play on usury and its effects on life. To take a way a man's tools is to take away his abilty to maintain his livelihood, and thus destroy him. Is it so shocking then to see teh userer demand a pound of flesh?

To a certain extent, then, that Shylock is a Jew become somewhat secondary. the strength of the play though reside inthe rather startling point made by Chesterton that it doesn't make much of the fact that the man was a userer (which is after all a given) but that the userer was a man (which is often forgotten). Our often misplaced sense of guilt tends to forget that.

For the few who are even remotely interested, here is the entire quote.

"There was a controversy in the columns of an important daily paper, some time ago, on the subject of the character of Shylock in Shakespeare. Actors and authors of distinction, including some of the most brilliant of living Jews, argued the matter from the most varied points of view. Some said that Shakespeare was prevented by the prejudices of his time from having a complete sympathy with Shylock. Some said that Shakespeare was only restrained by fear of the powers of his time from expressing his complete sympathy with Shylock. Some wondered how or why Shakespeare had got hold of such a queer story as that of the pound of flesh, and what it could possibly have to do with so dignified and intellectual a character as Shylock. In short, some wondered why a man of genius should be so much of an Anti-Semite, and some stoutly declared that he must have been a Pro-Semite. But all of them in a sense admitted that they were puzzled as to what the play was about. The correspondence filled column after column and went on for weeks. And from one end of that correspondence to the other, no human being even so much as mentioned the word "usury." It is exactly as if twenty clever critics were set down to talk for a month about the play of Macbeth, and were all strictly forbidden to mention the word "murder."

The play called The Merchant of Venice happens to be about usury, and its story is a medieval satire on usury. It is the fashion to say that it is a clumsy and grotesque story; but as a fact it is an exceedingly good story. It is a perfect and pointed story for its purpose, which is to convey the moral of the story. And the moral is that the logic of usury is in its nature at war with life, and might logically end in breaking into the bloody house of life. In other words, if a creditor can always claim a man's tools or a man's home, he might quite as justly claim one of his arms or legs. This principle was not only embodied in medieval satires but in very sound medieval laws, which set a limit on the usurer who was trying to take away a man's livelihood, as the usurer in the play is trying to take away a man's life. And if anybody thinks that usury can never go to lengths wicked enough to be worthy of so wild an image, then that person either knows nothing about it or knows too much. He is either one of the innocent rich who have never been the victims of money-lenders, or else one of the more powerful and influential rich who are money-lenders themselves.

All this, I say, is a fact that must be faced, but there is another side to the case, and it is this that the genius of Shakespeare discovered. What he did do, and what the medieval satirist did not do, was to attempt to understand Shylock; in the true sense to sympathise with Shylock the money-lender, as he sympathised with Macbeth the murderer. It was not to deny that the man was an usurer, but to assert that the usurer was a man. And the Elizabethan dramatist does make him a man, where the medieval satirist made him a monster. Shakespeare not only makes him a man but a perfectly sincere and self-respecting man. But the point is this: that he is a sincere man who sincerely believes in usury. He is a self-respecting man who does not despise himself for being a usurer. In one word, he regards usury as normal. In that word is the whole problem of the popular impression of the Jews. What Shakespeare suggested about the Jew in a subtle and sympathetic way, millions of plain men everywhere would suggest about him in a rough and ready way. Regarding the Jew in relation to his ideas about interest, they think either that he is simply immoral; or that if he is moral, then he has a different morality. There is a great deal more to be said about how far this is true, and about what are its causes and excuses if it is true. But it is an old story, surely, that the worst of all cures is to deny the disease."

It can be found in his book "The New Jerusalem" here:

http://www.online-literature.com/chesterton/new-jerusalem/13/

Even the few posts here tend to continue what Chesterton called the "Jewish Problem", which is simply to consider any situation which involves a Jew as being essentially a problem about Jews and our relationship with them, as if they were Martians or some alien speices that must be accepted on sufferance. Even Chesterton himself gets rather enmeshed in such racist snares himself.

I think he knows this in reading the Introduction to the book, just as I think he knows that he gets himself even deeper into the soup as he tries to get himself out of it: it is always the real problem about discussing race relations - no matter how hard you try not to, you become either Archie Bunker or Mike Stivic (for those of us who rememeber All in the Family) or worse: a hybrid of the two. But I also think that it is the price to pay in adressing the question. You must adress your own stereotypes, by starting with stating them, as much as all the problems they entail.

Not his best writing, I'll admit (as I find he is dealing somewhat with questions he isn't really familiar with) , but for all that I think he muddles along pretty well.

" To talk of the Jews always as the oppressed and never as the oppressors is simply absurd; it is as if men pleaded for reasonable help for exiled French aristocrats or ruined Irish landlords, and forgot that the French and Irish peasants had any wrongs at all. [...] It might be worth while for England to take risks to settle the Jewish problem; but not to take risks merely to unsettle the Arab problem, and leave the Jewish problem unsolved."

Retunrnig to Shakespeare, there is of course the 'We vs. They' Tug of War in the play and it is very much that which the Bard shows up. Most all the characters that invoke Shylock's origins are shown as prigs and snobs. The same can be said of Othello and racism. Just as the problem of race is a smoke screen for the problem of Jealousy, the problem of Religion tends to hide the dehumanizing effects money has on interpersonnal relationships. Shylock is warped by his interest in money just as his creditors are warped by their own attitudes towards money and moneylenders.

When I saw a production of The Merchant last summer, I was struck by the way in which the play showed Shylock as beset upon by the Christian "good guys" in the most ruthless and despicable manner.   In effect, Antonio, Bassanio and Gratiano toss all sorts of vituperation and invective upon him, with some spitting and cursing involved, and this passes as "normal."  More to the point, the poor guy has to bear the thought of "losing" his daughter to the Christian rogue who steals her away, and in the end he forfeits not only his bond but half his wealth to Antonio.  Perhaps something like Pierre Bourdieu's concept of "positionality" is applicable to this situation, in which the Jew in Venetian society is relegated not only to the role of the moneylender but also to that of the miscreant-scapegoat of a Christian-dominated community--and the part becomes ego-syntonic with him.  Of course usury and capital weave their own logic in this social field. The play invites us to sympathize with the Semitic outsider while at the same time deploring the racist antics of the Christian characters, and hopefully the reader or spectator arrives at a point where the transvaluation of dehumanizing perspectives negates and supersedes both.

No doubt the demand for a pound of flesh is strange and shows that the man is out for revenge and not for his money. Too bad he gets out-witted, but the system has a lot to learn from the situation.