You can set up WireGuard to only route local addresses to the peer, so you would only be routing dns requests through the tunnel and everything else goes via whatever other interface you have. So performance is minimally impacted in that way.
You can set up WireGuard to only route local addresses to the peer, so you would only be routing dns requests through the tunnel and everything else goes via whatever other interface you have. So performance is minimally impacted in that way.
But all these layers exist on both sides of a modem. Really the modem is translating between a type of physical/data layer on one side (e.g. twisted pair ethernet) to a different physical/data layer on the other side (e.g. docsis)