I think that using SELinux would be counterproductive. For this type of thing, the attacks that matter the most are web attacks (CSRF, etc) and attacks against the kernel.

For web attacks, the web UI has to be quite privileged unless you explicitly privilege-separate it, Sandstorm-style. That seems like a big project for a router.

For kernel attacks, SELinux just increases the attack surface. Throw a good seccomp filter at things, deny access to proc and sysfs to things that don't need them, and use hardening options.

The trouble with anything other than Linux or maybe FreeBSD is driver support. And, for a router, even if an attacker merely compromises the network stack instead of compromising the whole system, the attacker still mostly wins.

What would be interesting is a good verified boot or immutable storage model. For example, have the router boot into a mode in which it can't write to persistent storage unless a physical button is used at boot time. eMMC can do this, but I have no idea whether the NOR and NAND chips in most routers can.