I just remembered that I didn't close the loop here.
So, it turns out my wife's company uses some L2 VPN and due to a server misconfiguration, I was seeing the vpn client on her laptop misbehave. She raised a ticket with their IT and the rest is beyond our control.
As far as the issue in my network, after turning off the ISP router's wifi and putting all our devices behind pfsense box, I'm not seeing those issues any more.
Phew! The moment I was about to turn off the capture I saw the smoking gun. I was almost getting ready to call the device malicious and return it.
Thanks for helping look into this issue guys. Much appreciated!
Cheers!