TC 1TB keeps dropping PPOE Conection

Welcome to the discussions, Machine3!

It sounds like you have your Time Capsule configured to provide the PPPoE service, correct? To confirm, open AirPort Utility, click Manual Setup and then click the Internet icon. Connect Using will be set to PPPoE. Make sure that the Service Name area is completely blank.

Click the PPPoE tab just above Connection Sharing and make sure that your Connection is set for Always On.

If you still don't see any improvement, the next step would be to hard reset the Time Capsule by holding in the reset button until it blinks quickly. (This usually will take 5-10 seconds.) Then, reconfigure the Time Capsule again.

I don't think it make much difference, but if you haven't tried a factory default reset yet, it might be worth a shot. All indications point to an intermittent problem with the TC. Other than an exchange, I can't think of any additional steps that might help the situation.

If all else fails, configure the modem to connect via pppoe and provide a public IP address to the router. My airport extreme would frequently disconnect from my pppoe service and had to use this method to get a steady internet connection.

+"If all else fails, configure the modem to connect via pppoe and provide a public IP address to the router."+

Yes, this is an option if the modem can be configured this way. In this case, the TC would Connect Using: Ethernet, not PPPoE.

You will probably see a Double NAT warning if you configure things as suggested, but usually you can ignore this without problems.

Most modems can be configured by entering an IP address for the device...usually something like 192.168.1.254 or similar. Check your documentation or check with your ISP on this.

A couple of thoughts:

If the modem can't be configured, that would imply that it is either a very inexpensive device (if new) or an older modem (4-5 years or more). I had to replace my old Speedstream modem some time ago because I traced my intermittent PPPoE connection problems to it after I had mistakenly blamed my router for the problem. But, your issue may of course be different.

I don't know how to test a router for an intermittent PPPoE connection problem.
If you have the time and inclination, I would setup a PPPoE connection on my computer, power down the Time Capsule for a few days and watch the connection to see if there are any drops. If there's not, that points to the TC. If there are, that points to the modem.

Post back if you decide to do this and need some instructions on setting up your computer for a PPPoE connection.

Is there an update to this issue?

By "update", do you mean something official from Apple? I have not seen any firmware or software updates regarding this. Apple does not respond on the user to user forum, so you won't see anything from them here.