What about web 2.0?
Putting aside the morality/legality of this practice, what about the technical impact? This could potentially have adverse effects on some new style web site operation. Sites using XMLHttpRequest may have to change some practices on the server side to ensure that anything returned that isn't a full HTML page doesn't have the text/html header, otherwise the behavior of thier website could be broken.
That is, assuming the ISP is only modifying/injecting HTML pages, what is next? XML? JSON? Binary files such as images? In my view this is simply a man-in-the-middle attack on my use of the web which I have already paid for.