I lived in Korea as well and travel there often and I've never tried to use USD there. I had a few friends stationed there that would use USD on base but would always use KRW off base.

I'd suggest using an ATM; my preferred ATMs were the KB Bank ATMs. The exchange rate at ICN is horrible. If I brought USD, I usually exchanged it in Itaewon or in NamDaeMun Market and only in $100 bills because those are the best rates but after I used all that, ATM is the way to go.