1. Currently, under Korea's copyright law, there are broad classroom exemptions for educational use of material, without compensation to rightsholders. (Chapter 2, Section 4, Subsection 2, Article 25 ) Look for universities and other public schools to become hotbeds of exemption challenges.Three Strikes, Movie Copyright and The Mad Cow Coming Home to Roost (Thanks, Joe!)
2. PC Bangs (internet cafes) might try to put each other out of business using the new laws. This could result in some cafes using advanced black-box anonymizing services to protect themselves and their customers (not necessarily a bad thing).
3. Korean "netizens" might otherwise protest the new system by seeding government BBS and official websites with infringing links and material, and then use the reporting process to overwhelm the system.
4. This proposed law will push internet services into greater black-market criminal activity. Pirated software can be found everywhere, including software commonly-used by government employees. 99% of Korean software is Windows-based. Korea uses active-X controls for practically everything, meaning the entire country is already prone to security problems.
5. Additionally, the use of the internet for organizing civil protest in Korea has been highly effective: the recent Mad-cow Disease protests (while factually incorrect) reached hysterical proportions, delaying implementation of the US-Korea Free-Trade Agreement. Korea still has national security laws against criticizing the government. Online K-blogger Minerva was arrested because he brought to light the Korean government's economic manipulations. With an unstable currency and an undercurrent of restlessness among its populace, the government has been greatly embarrassed. Look for this law to be the perfect tool for Korea to once-again shoot itself in the foot.