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He is well read.......... This sentence is being understood as meaning "He read a lot".

But can't we understand this one as meaning, "People read his books a lot"?

And, if we want to say, "People read him a lot", how can we say that?

"He is being read by people"
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Perhaps you could say "He is widely read" but better would be "His books are widely read."
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pructusHe is well read.. This sentence is being understood as meaning "He reads a lot".
Not exactly. The usual meaning is that someone who is "well-read" is very knowledgeable, usually in a wide range of fields, through having read extensively. For example, someone who reads a lot of romance novels or westerns to the exclusion of everything else would not normally be said to be well-read.

See this page for the formal definitions: http://www.thefreedictionary.com/well-read

I don't know if this expression is considered an idiom but it probably should be.