Yes I am hearing more and more reports of the ATMs not working. Also of cards being cloned after they have been used. I still have never used one and don't plan to until I hear they are more reliable.

The 1000 Kyat note it still by far the most commonly used note here. Locals don't think twice about paying very large amounts all in 1000Kyat notes. But yes you can always ask for 5000 Kyat notes. I would actually avoid the 10,000 kyat note they are very new and most people here will not have even seen one.