Of course the default gateway is close - it's the next IP hop. If it's indeed being used as a NSA/GCHQ backdoor, the actual attacker is at a different address.
Traffic snooping is surely much easier to implement upstream, and your ISP is indeed upstream of everywhere, despite what this paper alludes to.
As far as a branching off point for attacks on your network - given that this seems to be a modem-only unit, there's still your router between it and your local network. It seems that its attack surface remains the same as for a dumb PPPoE translator.
edit: Actually they could be describing an entire modem+router combo, but an error in saying the lan PC initiates its own "PPPoE" request threw me off. The interfaces look like a multi-port router (in the one's I've seen, the CPU usually has one ethernet interface which goes into the port of a vlan-capable switch). Really, the lack of showing what the complete config looks like when the user's PC is online makes it hard to see what they're actually getting at.
The only actual suspicious thing presented here is the specific 30/8 IP address, and perhaps that has another explanation (address reuse?). Independent verification is needed, but definitely not using their flawed "Method 2" which clearly changes your modem's complete setup :P.
1. The "fix" is to log in to the system and manually disable at runtime the VLAN and firewall rules. Nothing is said about making the fixes permanent - as if the authors have never experienced a wedged modem or router. Or had their power go out. (Perhaps they assume everyone has an UPS in place.)
2. The presence of extra VLAN is clear, that's true. I would have wanted to see redacted traffic dumps from a controlled lab network, where the authors actually show that the device attaches to a known VLAN. Right now we have nothing but their inference about egress firewall going up shortly after device boot.
It looks like a real deal. It's just presented in a way that puts me off. I'm waiting for external confirmation and more technical data.