Probably because of the 70s hairstyles.

I made that mistake as a little kid watching the movie in 1970 as Vietnam was dragging on. And I suppose Altman was using the Korean conflict but sort of attacking our involvement in Vietnam, or perhaps all wars.

Sutherland was similar in Kelly's Heroes. Playing a tank commander who looked and acted like he belonged on Haight-Ashbury in 1967 and not France circa 1944.

Altman tried to make it as non-specific as possible knowing the audience would take
it for Vietnam. But some Korea references snuck through. One direct reference to
Vietnam comes when they take Ho John for his physical. The hats worn by some of
the townspeople are the wide brimmed cone shaped type familiar from Vietnam footage.

I think when I saw the movie in 1970 I thought it was Vietnam until someone corrected me.

Korea is actually mentioned twice during the movie. On TCM preview the guy said they never mentioned Korea so I listened for it, they said "from Washington to Seoul" once and also someone said "here in Korea" once too.

Yes he did that was his intent to make an anti war film about Vietnam.
He almost got away with it too, until it was noticed there were no references to Korea.
That's why in the opening scene with Hawkeye the quotes from Eisenhower and MacArthur were added.

It strikes me as being very strange that any movie set during the Korean War would have male characters with hair styles that look like those common in 1969. Donald Sutherland's "look" would have been considered extreme during the early 1950s. One explanation might be that Altman did this purposefully in order to make it obvious that his intent was for the film to be a comment on the Vietnam War.

If you follow the 38th parallel on a world map, you find it goes right through California. Go to 33rd or 34th parallel, you get South Korea and Southern California. There are many terrain similarities. Et voila!
"They sucked his brains out!"

I don't think anyone confused the actual setting of the film with Vietnam. But the movie was seen as a comment on and reflection on the Vietnam war, which was certainly on everyone's mind at the time.
As for the landscape, it was shot in southern California, like practically all other American movies were at the time.

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