STARTTLS is sent via the unprotected SMTP channel. The biggest problem with this isn't the lack of encryption, but more the lack of MitM protections.
Imagine if when you wanted to connect to your bank over HTTPS you first had to send a HTTP request which asks permission to "upgrade" to HTTPS. Obviously any bad guy worth their salt is going to intercept that unprotected HTTP traffic, strip out the STARTTLS, and then leave you using the HTTP channel they can monitor or alter.
So while, yes, in this case ISPs are likely "MitM"-ing their own traffic (which by definition isn't a MitM), it still leaves you open to bad guys on your side of the connection (e.g. the insecure WiFi problem). But even if ISPs weren't someone else could be.
STARTTLS is sent via the unprotected SMTP channel. The biggest problem with this isn't the lack of encryption, but more the lack of MitM protections.
Imagine if when you wanted to connect to your bank over HTTPS you first had to send a HTTP request which asks permission to "upgrade" to HTTPS. Obviously any bad guy worth their salt is going to intercept that unprotected HTTP traffic, strip out the STARTTLS, and then leave you using the HTTP channel they can monitor or alter.
So while, yes, in this case ISPs are likely "MitM"-ing their own traffic (which by definition isn't a MitM), it still leaves you open to bad guys on your side of the connection (e.g. the insecure WiFi problem). But even if ISPs weren't someone else could be.