1) No, you stay in transit. You go immediately for "International Transfer"
2) It will be REALLY tight. If you're flying F or C, and/or if the arrival area is empty, you might have a good chance to make your connection, but it will be really, really tight.

Basically, when you get to the immigration queues, stay on the very right side, where it says "International Transfers". They'll have a check on your ongoing boarding pass (Make sure you get them in MUC already, that you're checked through all the way, including your luggage! Any delay in PEK getting them will make it impossible for you to catch the connection) and your passport. Then you'll be going down one level for a security check. After that check, you'll be in the main terminal.

Now, if your airplane arrives on time, and there is no queue, you might be at your departure gate 45 minutes prior to departure.

If you've some small delay, or if there are queues.. it might be a run to the gate.. or you might entirely miss it.

The good thing is, as long as it's a legal connection, on one ticket, they'll simply put you onto the next flight PEK-ICN, which there are plenty off.

So, as long as you don't absolutely have to be in ICN with this flight, I would go ahead and book it.