That passage is typology, a bonafide figure of speech. A type (Greek, tupos) is an example developed from a real, historical event. (See 1 Cor. 10:6, "examples.") In other words, it's a sermon illustration. To think of the Greek word translated "allegory" as just like a modern allegory (Pilgrim's Progress) is a large mistake.
It is an extraordinary example of allegory/typology, which reverses what we would expect in teaching about Israel. Hagar & Ishmael were not on the scene at all on Sinai. only the descendants of Sarah, together with Egyptians who had joined them.
Paul describes the Jews as if they were Ishmaelites -
For this Agar is mount Sinai in Arabia, and answereth to Jerusalem which now is, and is in bondage with her children.
And quotes directly to show their status before God -
Nevertheless what saith the scripture? Cast out the bondwoman and her son: for the son of the bondwoman shall not be heir with the son of the freewoman.
Clearly by that allegory/analogy, unbelieving Jews - aka Israel - have no claim to privilege by virtue of their Abraham descent - John (baptist), Jesus, & now Paul dismiss them. Their natural birth is is no status - they must be born after the Spirit - a point the Apostle John makes very clear in the opening of his Gospel.
Yes, they were always fulfilled literally. About Christ:
Virgin birth (Is. 7:14, Matt. 1:18)
Descendant of Abraham (Gen. 22:18. Matt. 1:1)
In the lineage of David (Jer. 23:5, Luke 3:23, 31)
Of the tribe of Judah (Gen. 49:10, Micah 5:2, Luke 3:23, 33)
The descendent of Jesse (Is. 11:1, Luke 3:23, 32)
Born in Bethlehem (Micah 5:2, Matt. 2:1-6)
The gifts of the Magi (Ps. 72:10, Matt. 2:1, 11)
And many, many other prophecies of Christ's 1st coming were fulfilled literally. But for some strange reason, you folk don't want to interpret prophecies of the 2nd coming literally.
And you folk don't recognise the events of Acts & AD 70 as the fulfilment of OC prophecy - Joel 2; Isaiah 66:8; Dan. 9; Zec. 13:1; etc, including Covenant Theology as developed in Scripture.
This passage in Luke 24 is an important conversation that shows Jesus' own approach to the interpretation of OC prophecy -
Luke 24:19 ..... And they said unto him, Concerning Jesus of Nazareth, which was a prophet mighty in deed and word before God and all the people: 20 and how the chief priests and our rulers delivered him to be condemned to death, and have crucified him. 21 But we trusted that it had been he which should have redeemed Israel: .....
.....
25 Then he said unto them, O fools, and slow of heart to believe all that the prophets have spoken: 26 ought not Christ to have suffered these things, and to enter into his glory? 27 And beginning at Moses and all the prophets, he expounded unto them in all the scriptures the things concerning himself.
Jesus DID redeem Israel. At Pentecost & after, many thousands of Jews/Israelites, including priests & Pharisees from
every nation under heaven responded to the Gospel, & formed the church of believers. Soon Gentiles were added to the church & welcomed without them being circumcised.
It's instructive the way Peter handles the Sinai Covenant in 1 Peter 2. Christ fulfilled the terms of the Exo. 19 covenant by his own perfect obedience. Now the believers (strangers) become the full beneficiaries of the OC & are experiencing the OC promise.
Exo. 19: 5 Now therefore, if ye will obey my voice indeed, and keep my covenant, then ye shall be a peculiar treasure unto me above all people: for all the earth is mine: 6 and ye shall be unto me a kingdom of priests, and an holy nation. These are the words which thou shalt speak unto the children of Israel.
1 Peter 2: 9 But ye are a chosen generation, a royal priesthood, an holy nation, a peculiar people; that ye should shew forth the praises of him who hath called you out of darkness into his marvellous light: 10 which in time past were not a people, but are now the people of God: which had not obtained mercy, but now have obtained mercy.
There's no "
IF" in Peter's quote. John alludes to the same Covenant promise -
Rev. 1: 4 John to the seven churches which are in Asia: Grace be unto you, and peace, from him which is, and which was, and which is to come; and from the seven Spirits which are before his throne; 5 and from Jesus Christ, who is the faithful witness, and the first begotten of the dead, and the prince of the kings of the earth. Unto him that loved us, and washed us from our sins in his own blood, 6 and hath made us kings and priests unto God and his Father; to him be glory and dominion for ever and ever. Amen.