I don't think that test123 interface is doing you any good here, it just raises the opportunity for things to go wrong - and be it 'just' that your ISP doesn't like two concurrent connections, work with wan alone.
If you haven't done much configuration with your router so far, it might help to start from a clean sheet - a factory reset, and then configuring wan for PPPoE with your username/ password. If that doesn't work out (even after a power down/ power up of the xDSL(?) modem), please paste the full /etc/config/network and only redact username/ password with xxx or similar.
Yes that is what you should do. Do not create a new interface.
The System Log will contain some messages about the attempted PPP connection. Authentication error could be because you need to register your router's MAC address with the ISP, or clone the MAC of your old router onto the wan interface.
As per what you said, I've factory reset the router, configured WAN with the PPPoE credentials, and rebooted my modem. I'm still getting the same error, however.
Try cloning the MAC address of the working router to the wan interface of the OpenWRT device.
Run these commands from the command line (copy/paste the whole block), but first set the correct MAC address.
uci add network device
uci set network.@device[-1].name='wan'
uci set network.@device[-1].macaddr='aa:bb:cc:dd:ee:ff'
uci commit network
/etc/init.d/network restart