I'm not in support or sales, but my understanding of the Affiliate plan is that you get a payment for each new hosting plan you help to sign up. The new customer needs to use your particular affiliate code during signup, for you to get credit. From a quick reading of the Affiliate pages, it doesn't sound like you would get more than one credit for bringing over a single reseller (sub-ISP), but your case sounds unusual enough that it would be worth your writing to email@example.com and asking them specifically.
If the existing customers are to maintain their relationship with the mom-and-pop ISP, it sounds like the ISP would want to be in the reseller program. If they are being turned over individually to Lunarpages, and signing up directly with their own accounts, the affiliate program may be the way to go. I'm not really familiar with this area, so I would talk directly to sales about it.
Depending on where this conversation goes, this topic may be moved to either the Affiliate Marketing board, or the Reseller Hosting board.