Exactly. Only the AWD Aerio competes with the Impreza, and even then the Impreza is a bigger and more expensive car. The Aerio competes with Civic, Corolla, et al., with the bonus of having available AWD. This is not to say people will not cross shop the Aerio and Impreza, but when they are doing so, it is because their primary need is AWD.
There is nothing to say a Korean car cannot be as reliable as a Japanesse one. Indeed, if Hyundai's recent quality reports are an indication, they certainly can be very well built!