Sharing WiFi hotspot to iPhone when Macbook is connecting to WiFi

All routers are an ISP router as all connect to the internet via the signal your ISP sends. If only certain devices can connect, then the router is faulting. Try power cycling it. If you mean it's the property of your ISP, that doesn't really have any affect on your current problem

What does " I just want my Mac to be the middle," mean? There is no pecking order on routers, all devices are treated equally unless your router has specialized ports? Does it?

Pulling the power plug, waiting one minute, then reattaching it can fix a lot of problems. My experience with even good quality routers is they all fault from time to time and need to be reset..

Your iPhone needs to have a network created just like your Mac does. The screens look different, but the process is the same: enter the network's name and password and click "Join" or "Connect" or whatever the appropriate button is.

You turn the hotspot off or on with the slider selector.

Unless your router is somehow restricted or damaged, it will accept the iPhone just like any other internet capable device.