I also used Airtel DSL earlier and Asus RT16 Router. I had done following configurations.
1) Change Airtel modem to bridge mode. (Do write down username/password before you change to bridge mode, Password can be seen in source code of webpage)
2) Configured PPPoE on router with username password which was earlier configured on modem
3) Configure required services like DHCP , Wireless etc on router
I faced problem with running torrent on router, So had change OS to DD-WRT and Later changed Router OS to tomatousb