Yes, that device is used for that purpose, but the claim is somewhat misleading, including about its frequency of use.
The device is called an "A/V Closure". A/V stands for Anus/Vagina. Here are some examples for sale.
The A/V closure is used to prevent leaking from the anus in cadavers.
Kari the Mortician explains that there may be leaks if there are any punctures or broken tissue between the "cavity" and the abdomen. She likens it to the elderly with weakened sphincters who wear Depends diapers.
When the person is deceased they may leak out still, and they may leak out more, so we want to keep any [...] poop, any urine, any cavity fluid, any blood, any anything from leaking out these areas.
However, but it is not required for all cadavers, and other techniques are also used.
Now in 21 years I have never used one of these [...] I always pack the area with cotton. I know some [funeral] directors who use one of these on every single body just in case. Most will use them as needed, but some directors, like myself, never use them.
I found unconfirmable anecdotes that support that they are not universally used.
Aside: I would quibble about calling it a "butt plug", because a butt plug is a sex toy, and this is not. By comparison, it might also be inserted into a vagina, but I wouldn't describe it as a dildo any more than I would describe a speculum as a dildo.