Unless I misunderstood the definitions, an algorithm for the problem in Definition 1 (i.e. their main result) is in fact enough to attack decision-LWE if the noise is small. The fact that they need a promise that the point is always close to the lattice doesn't seem to be a problem.
A decision-LWE problem mod q, where samples are of dimension n and the noise is a gaussian in each coordinate with standard deviation s, can be converted into the following decision problem: given a random lattice $L$ (where "random" is a prticular distribution induced by decision-LWE) of dimension $2n$, one is given a target that is either less than a distance $s\cdot\sqrt{2n}$ away (actually, there should be a small constant close to $1$ being multiplied by the preceding upper bound, but let's ignore it for simplicity) from $L$, or it is in a uniformly random coset of $\mathbb{Z}^{2n}/L$. In the latter case, the distance to $L$ is proportional to the covering radius - so it is quite far away. (I should mention, there are ways to map decision-LWE to lattices of different dimension, but for simplicity, let's just stick with the above mapping.)
So here is how one would go about solving this problem using an oracle for the problem in Definition 1. Set $b=s\cdot\sqrt{2n}$ and $a=b\cdot n^4$ (they need this relationship between $a$ and $b$). The first thing we need to do is figure out what is the output of the oracle if we feed it random lattices (the same kind that we generate in decision-LWE instances) and random targets. Note that the promise of the target being near the lattice is not satisfied, but the algorithm must still output something. We can learn what the output (or the distribution of the output) is by feeding it randomly generated lattices with random targets. If it outputs something different than when the target is $<b$ away form the lattice, then we can use it to solve the problem defined in the previous paragraph. On the other hand, if its output is the same as when the target is $<b$ away, then it must be different from its output when the target is in the interval $[a/2,a]$. Thus we can use this oracle to solve the Decision-LWE problem when the standard deviation of the noise is s such that $s\cdot\sqrt{2n} \in [a/2,a]$. This is an even harder problem since the noise is larger. So at worst, we can solve Decision LWE when the noise has standard deviation $s=b/\sqrt{2n}$.
Now the question is, what is $b$? They define $b=\lambda_1(L)/n^{17}$. So we need to know $\lambda_1(L)$ for the $L$ that is induced by the decision-LWE problem. It turns out that the shortest vector length is close to the Minkowski bound. The determinant of $L$ is $q^n$, and its dimension is $2n$. So $\lambda_1\approx\sqrt{n}\cdot \sqrt{q}$. So that's it -- whenever $s/\sqrt{n}<\sqrt{n}\cdot \sqrt{q}/n^{17}$ (or $s<\sqrt{q}/n^{16}$), an algorithm that solves the problem in Definition 1 can be used to solve decision-LWE where $s< \sqrt{q}/n^{16}$.
These parameters are quite outside the scope of anything that is currently being proposed (anything with those parameters that is not already broken by LLL is going to be horribly inefficient), but of course they could improve. Furthermore, their description is of an algorithm that works in the worst-case -- heuristically, it might perform better. If this $n^{17}$ gets to $n^5$, some reasonable things may start getting broken. An if it goes down to linear, then encryption/signatures may become affected.
I think the first thing to do, though, is to wait until some experts in quantum algorithms verify this paper. If they agree that it's correct, then things will become interesting.