Disclaimer: I am one of the (many) engineers working on the project.

Before COVID I worked for a European lunar exploration startup and access to a constellation like this would have changed everything. The plan was to provide an end-to-end payload transportation service to the lunar surface and we wanted to fly our own two rovers as a demo mission.

While you can accomplish all communications (TM/TC, HD video) and navigation (orbit determination, surface nav) tasks with terrestrial ground stations, it is hellishly expensive.

Just as an example, the good thing about the Moon (in contrast to Mars) is that it is very close and you can drive a rover almost in real time due to the comparatively low latency (that's what the Russians did with the Lunokhods: https://en.wikipedia.org/wiki/Lunokhod_programme). That means you can cover more ground than on Mars which was also very important to us because the plan was to drive to one of the Apollo landing sites (where you must land outside the exclusion zone) and we would have had only 10-12 days of daylight for our operations until the lunar night would have killed our electronics. For that you need good video feeds from the rover's cameras which again required downlink via X band antennas due to the Moon's distance from Earth. There are not that many X band ground stations and all the interplanetary missions are constantly fighting for the limited capacity.

We would have then needed even more ground station time for ranging operations, i.e. performing orbit determination during the transfer and prior to landing and determining the rovers' exact positions on the surface. In the end, we would have needed to pay several million EUR for ground station time alone. A reasonably priced Project Moonlight constellation would have been a godsend and significantly reduced the complexity of our operations. Cash-strapped startups are not the best customers, though...

I can only assume that all the companies in the NASA CLPS program are facing the same issues. The problem is that they are planning their missions and are designing their spacecraft now. If this constellation becomes a reality, it will certainly be too late for the first batch.

As for the ideas about Starlink, satellites are designed around their payloads, i.e. all subsystems (power, thermal, comms, on-board computer, propulsion) are designed to fulfil the requirements of a specific payload and its mission with some margins. Very rarely can you swap or add additional payloads without redesigning the whole system especially if your starting point is as streamlined a design as Starlink's is.
I am a huge fan of all things SpaceX but they are not miracle workers. Also Starship has not reached orbit (yet) and Super Heavy has not flown (yet).

Finally, the costs. As some others have commented, this is a paper study right now which is comparatively cheap (no idea how much exactly but my educated guess would be single digit millions). Whether this will be funded for real and becomes an actual program will be decided at ESA's next ministerial. In the grand scheme of things this is not a lot. Compared to of ESA's annual budget of ~6 billion EUR it is almost negligible. That again is a joke compared to NASA's annual budget of ~22 billion USD. Which still pales in comparison to the up to 1.3 trillion EUR that the German federal and state governments alone spent on the mitigation of the pandemic (https://www.zdf.de/nachrichten/politik/corona-novemberhilfen...) or the economic cost of climate change which is also in the trillions.
Yes, space hardware is too expensive, there is too much red tape, and frankly too much nepotism in OldSpace. But taking the few billions spend on space every year away and spending them on the "big problems of our time" would accomplish very little.

TL;DR: The technical benefits are real whether it becomes a reality and is commercially viable remains to be seen. SpaceX is great, Starship is great, Starlink is great, but it is also not magic. Space sounds expensive but really isn't when you do the math.