That depends on whether you're talking about local or internet traffic. For internet traffic, it doesn't matter what modem you use; your ISP can see EVERYTHING that you send out onto the internet. After all, they're your bridge to the internet, and everything you do passes through them first. It doesn't matter who the traffic is "addressed" to; it's passing through them, so they can read it if they want to.
However, it is possible prevent them from being able to read what you're sending with encryption. Sites that have SSL/TLS (ones that begin with https://) have encryption enabled by default, and it works from your computer all the way to the web server on the other end, so it's very difficult to eavesdrop on such traffic. But for sites that don't use SSL/TLS, you need to use a VPN service or TOR to hide your activity from your isp.
WPA encryption only works between the computer and the router - the router decrypts the information before it gets sent out onto the Internet.
If you're talking about local (LAN) traffic, it's pretty unlikely that your ISP has hijacked your modem to send such traffic to them for inspection, though theoretically it's a possibility. And you're right, installing a switch would likely protect you against this by making sure that local traffic is not sent to the ISP router/modem at all.