Is this true? For devices on the same subnet, I'm petty sure they don't even have to takl to the router. Maybe a managed switch can stop it, but I doubt most home routers have anything more than a dumb switch in them.
It depends™:) Yeah, if you have a dumb switch with devices plugged in, then the upstream router probably isn't relevant. But if you've got all devices on wifi running through a single box that's a router+switch+WAP+modem (very common in consumer home networking) then that single network box is in an excellent position to control devices talking to each other. YMMV.
Client isolation is a Wi-Fi feature, not an Ethernet feature. So a wireless client can't talk directly to another wireless client when client isolation is on.