Hi All,
I don't have access to a Huawei EchoLife so I don't know what the particular device can or cannot do and to top it up I don't have access to DD-WRT either.
Generally speaking the modem should be placed in a fully bridged mode, so that it passes the IP address over to the router. The modem will perform no DHCP, no DNS resolution, no NAT'ing. Just encapsulates ethernet packets into ATM frames and pushes them onto the BT network.
In this set up the router will be performing all of the above functions (DHCP, DNS, NAT) while also performing the authentication with the ISP's RADIUS server using PPPoE.
Since BT changed their RAS kit late last year PPPoE will no longer work with VCMux encapsulation. It
must be set to LLC. This increases the frame header size and therefore is not as efficient as VCMux, but if you don't like this you can always write a letter to BT to complain for the lack of choice their profit maximisation decisions and consequently restrictive technical solutions have reduced us to!
If you managed to get a connection with PPPoE to the Internet then your set up is correct as far as ATM encapsulation at the modem is concerned. The fact that the router disconnects at regular intervals tells me that you probably have not set up Keep Alive packets and if no packets are flowing the connection times out. In your screenshot of the router settings at a previous message, you had not enabled "Force Reconnect". You could try enabling this and see if the PPP connection remains, or you could look for other settings under "Advanced" that you could tweak.
In addition, the router logs may shed some light into this. You need to find out why the PPP connection fails and errors/warnings captured in logs could explain why it happens.
Finally, it may also be useful to set up a PC with PPPoE and connect it directly to the bridged modem, so that you can see if the PPP connection continues to fail and what the PC logs reveal.
Hope this helps.