Is a person who touched his محارم (unmarriageable kin) with lust in the past—and is now in a state of severe depression, having repented and committed to righteousness—considered righteous and forgiven by God, or should he be shunned?

Touching female Mahrams with lust is an abominable act and a grave evil, but your friend's repentance from it is a good thing. He must feel the greatness of Allah's mercy and forgiveness, and not despair of Allah's mercy, but rather think well of Him, and cast away obsessive thoughts and suicidal ideations, because suicide is a major sin that necessitates eternal dwelling in Hellfire. One who repents from a sin is like one who has no sin. You must stand by him and help him, and not disclose his secret.