This is gritty and bleak realism at its best. We are in a countryside village on the border to North-Korea were poverty and war (both the Korean war and the continuation of the cold war) takes its toll on the villagers. Prospects are none, but some think of America as one and therefore learns English. This also provides some of the small pieces of comedy in the movie, for example when some youngsters try to translate from a hustler magazine or when two bullies are tough with speaking English with strong Korean accent; Koreans have trouble pronouncing f for instance.. Some other comedy is the US army battalion running and crawling everywhere and the war veteran crazy for medals always bragging about killing 3 commies.
Anyway this very grim and bleak realism is obviously made as a political commentary. I don't blame any of them, they are victims of their circumstances. I sympathize with every one of them. Kim Ki-Duk don't blame anyone either, the Americans are portrayed as human, not as heroes nor devils, but the theme of globalization and colonization still lies implied in the movie. Actually its full of commentary. I wont get into it here.
I know there's a big difference between countryside Korea and big city Korea, but even though I cant say if its real or not, I believe this to be quite realistic. The utter consequences the movie depicts of course is fiction and made to emphasize the horror and drama, this is a movie after all.
This was not very well received in Korea and understandably so, it takes up problems that are very actual today and brings up a painful past. To get rid of these problems it is very important however, that someone like Kim Ki-Duk makes these kind of movies and for people to see them. So go see it!! But its not a pleasant watch.