If you got your router before Dec 2008 you shouldn't need to take any action. If you visit http://192.168.1.254/ and are prompted for a username and password right away then the reported potential security flaw does not apply to you. You are already safe from the reported vulnerability and you need not take any action.
What to do if you need to change your Administrator password. To change the default password on a Thomson 585v7 there are a few simple steps to follow. First of all you need to open a web browser (the picture below shows Internet Explorer) and enter 192.168.1.254 in the address bar. If you already have a password set then you'll be asked for it here, otherwise you'll be taken to the router configuration page. On the left hand side there is a list of options, select Toolbox as shown in the image below.
From here you need to click the links for User Management and then Change password.
You'll be asked to enter the Old password and your New Password. If you haven't previously changed the password, leave the Old Password box blank.
Remember what password you chose and click Change Password. You should see a pop-up window appear that asks you to confirm User Name and Password. Type in Administrator as the username (note that capital letter A) and your new password you chose. Don't save the password. Press Ok and you'll be returned to the router config screen. You're done and can now close your browser. The next time you browse to 192.168.1.254 you'll be asked for your new password, you'll need to enter Administrator as the username.