It turned out to be bug in DD-WRT router firmware. Appears that this old bug is back in builds dated after 29.03.2014

The reason you can't reach the modem, is because the IP address of the modem is on the same network as your LAN, but isn't connected to the LAN (its connected to the WAN). The easy fix, if you can't change your modem IP, is to change your LAN IP range. Use something like 192.168.0.0/255 instead of 192.168.1.0/255. Basically change your router IP to 192.168.0.1 and your DHCP server to serve IPs in the 192.168.0.X range.

Detailed Explaination

Right now you actually have 3 different networks:

As you can see in the image, the LAN and modem are on the same network, but separated by the router. The reason this is a problem is because when you send a packet to 192.168.1.1 from your computer on the LAN, the netmask (255.255.255.0) says that any IP from 192.168.1.0-192.168.1.255 should be on the LAN, so it performs an ARP query to find the MAC address of the machine with that address, but no machine on the network has that address, so it fails.

However, if they are different networks, they packet will always get sent to the default gateway(the router) which will then send it out the WAN port since it not destined for any of the devices on the LAN.