So I found this discrepancy mentioned on Tor.com in a post by Sylas K Barrett . His answer is that Ishamael was never bound...somehow he avoided that fate. Here are his words, which I have to say are pretty compelling: 

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The events of the Prologue of The Eye of the World take place after the final confrontation and the resealing of the Dark One’s prison. Lews Therin has already been taken by the taint, but Elan Morin is there to restore his faculties, to taunt him over what has been done. This shows that he was never imprisoned as the others were; somehow he escaped that fate, and has been free in the world since then, no doubt able to orchestrate much mischief. Then, when Rand confronts Ba’alzamon in his dream while at the Stag and Lion, he repeats the creed that the Dark One and all the Forsaken are bound in Shayol Ghul, and Ba’alzamon responds with anger.

“Fool, I have never been bound!” The fires of his face roared so hot that Rand stepped back, sheltering behind his hands. The sweat on his palms dried from the heat. “I stood at Lews Therin Kinslayer’s shoulder when he did the deed that named him. It was I who told him to kill his wife, and his children, and all his blood, and every living person who loved him or whom he loved. It was I who gave him the moment of sanity to know what he had done. Have you ever heard a man scream his soul away, worm? He could have struck at me, then. He could not have won, but he could have tried. Instead he called down his precious One Power upon himself, so much that the earth split open and reared up Dragonmount to mark his tomb. (TEOTW, p. 203)

At the time, I took this as a poetic speech. Believing Ba’alzamon to be the Dark One, I assumed that he meant that, despite being imprisoned, he is not “bound” because he has had the ability to reach out to touch men’s souls, to influence them and their world. He stood figuratively at Lews Therin’s shoulder because it was the Dark One’s taint that caused it. He gave Lews Therin his momentary glimpse of sanity because it was through Shai’tan’s power that the healing was done. But looking at it now, I see that it can be read literally. Elan Morin, also known as Ishamael, the Betrayer of Hope, was actually there. It’s much more simple than I took it all to be.

I have read the series four or five times and I'm still puzzled by the opening sequence based during the Age of Legends presumably after the bore was sealed (since Lews Therin is already mad, meaning the taint, which occurred as a result of using Saidin unbuffered to seal the bore, has set in). By my understanding of what happened, when Lews Therin sealed the bore, the dark lord and all the forsaken were sealed away with him, imprisoned. However, Ishamael shows up and restores Lews Therin's sanity so that he can see that he has killed his whole family and then Lews Therin commits suicide, creating Dragonmount. 

So my question is simple: How can Ishamael appear? Is he not imprisoned? What am I missing?