This question is not really related to VMWare or vSphere at all, IMHO. You are asking for a manual on how to set up PPPoE on Ubuntu - be it a local machine or virtual Environment.
Google lists a lot of results if you search for it.
Why do that the hard way? Install something that's designed to do that job, like pfSense. It's free, has a web interface, and rock solid (I've used it countless times to do exactly what you describe). You'll need 2 NICs in your host, and set up something like this:
pfSense VM virtual NIC 1 -> WAN vSwitch -> Physical NIC for WAN -> Internet modem
pfSense VM virtual NIC 2 -> LAN vSwitch -> Physical NIC for LAN -> Local network
Once you've done that, configure pfSense appropriately for your WAN and LAN, and off you go. pfSense can be configured to do PPPoE on the WAN side fairly easily. You'll want to go to the pfSense forum for help with that, or read the documentation.
I would strongly suggest moving your VMKernel management interface to your LAN side, however. You don't want that exposed to the Internet. You can set rules in your virtual firewall to allow access through to the VMKernel interface on the LAN side, if you so desire, or configure VPNs for access, etc. Just don't leave your VMKernel on the interface connected to the Internet. That's just suicide.