Could a network of WiFi routers replace an ISP?
Actually this has been done already -- they are called Wireless Internet Service Providers (WISPs).  They are generally used in rural area where it is not ecomical to provide wired access.  There were 879 Wi-Fi based WISPs in the Czech Republic as of May 2008, making it the country with most Wi-Fi access points in the whole EU.

Compared to the small "rubber ducky" antennas used on Wi-Fi routers inside the home, the antennas used in WISP systems are more like satellite dishes but aimed at a central access point.  Mesh networks are used to limit the number of channels shared by the same subscribers.  For more information, see this article (page 7).

Technology may include commonplace Wi-Fi wireless mesh networking, or proprietary equipment designed to operate over open 900 MHz, 2.4 GHz, 4.9, 5.2, 5.4, 5.7, and 5.8 GHz bands or licensed frequencies in the UHF band.  When operating over the tightly limited range of the heavily populated 2.4 GHz band, as nearly all 802.11-based WiFi providers do, it is not uncommon to also see access points mounted on light posts and customer buildings.