I have an odd problem related to this. I got it into transparent bridging fine. However, the first time the modem power cycles, it reboots in an odd state. Normally, in transparent bridging the INTERNET light is off and the WAN light blinks with traffic. After a reboot, the INTERNET light starts alternating red/green. Traffic seems to flow but a ping test shows that it runs for about 35 seconds and then drops packets for 4-5 seconds and then goes back to running. I've found that just putting the thing back into IPOE w/Static IP for a second and then reenabling transparent bridging fixes the problem, but I have no clue why.
It sounds like either a firmware bug in the modem, or a synchronization problem between the modem and the router. Have you looked up your modem's manual to see if the light indicates a specific error condition? Have you checked to see if any firmware updates are available for the modem and the router?