iptables: How to block UDP between devices on LAN-side of gateway (using dd-wrt firmware)

Most likely you cannot interfere with the LAN-to-LAN traffic. All devices that I know that run DD-WRT / OpenWRT have an integrated switch, that switches traffic directly between LAN devices on layer 2.

Only traffic that needs forwarding is passed to the router part (layer 3) of the system, where Netfilter can intercept the traffic.

You can try setting up a Linux box with multiple Ethernet adapters and then bridging those adapters together. Then you can use br_netfilter to force the L2 traffic go via Netfilter, allowing intercepting of the traffic.