Is anyone under the illusion that every major ISP is not already doing this?

Yes. None of my TLS connections are signed by untrusted CAs, as this report describes. Additionally, I am able to validate certificate chains of various websites that I visit and see that they are signed by CAs not controlled by my ISP. I have a major US ISP that I would absolutely jump at the opportunity to shit on, but I'm not going to pretend they're doing something that I can verify they aren't.

I doubt it it's happening in a widespread manner - at least for now.