What banks were you using? While black market exchangers and hotels won't take bills with any blemish (the biggest one being a crease down Ben's face), I've had the big banks take worn bills without even batting an eyelash.

Also, I would only take out cash at an ATM that's actually attached to a bank or major building (like the mall or high-end hotel). Some machines have lower withdrawal limits than others. The Citi ATM at the Kumho Plaza had a limit of 2M, while the one at a branch down the street gave the option for a 12M withdrawal (I only needed 8M at the time).