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"
Perhaps you could say "He is widely read" but better would be "His books are widely read."
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.