The first thing I want to shout from the mountaintops is, "BRING SMALL BILLS!!!" You will find it very difficult to break a $20 bill anywhere but a supermarket or bank, and even then they won't be happy about it. My strong recommendation is to bring a whole pack of $1's and as many $5's as possible. This is especially true in the craft markets, where I've stood sheepishly by, watching a vendor breathlessly scurry from booth to booth looking for someone able to break my five.
As far as obtaining cash, AmEx traveller's checks can be cashed at Banco de Guayaquil (in Quito on Ave. Colon and Reina Victoria) for a 1.5% commission (you have to go to the third floor to do this). I was also able to cash one at a hardware store in Banos (where there were NO Visa/Plus ATM's), but I haven't tried elsewhere.
I'd recommend ATM's for getting cash, especially if your currency isn't the dollar, but I have had problems with this. First, Banco de Guayaquil (Quito has several) is the ONLY bank that honors Plus/VISA ATM cards, despite the fact that other banks (like Pichincha) display the VISA symbol. You might have a better time with Mastercard/Cirrus, which seems much more popular here. If you're travelling to outlying areas, don't count on easy access to Banco de Guayaquil ATM's.
Second, twice in my five months here, the system was down and my transaction didn't go through, BUT the request was still sent to the U.S. system when the machines came back online, resulting in false debits from my account. The first time this happened, in December, it wasn't fully resolved till April (though my banks provisionally credited my accounts once they received my original, signed investigation request). The second time, however, the error was corrected within 2 weeks.
Credit cards are usable, but they are NOT widely accepted and will often result in a surcharge (or the store may offer you a 10% discount or more for cash payment).
Prices
Ecuador, since "dollarization" took effect a few years ago, has gone from being about the cheapest South American country to the most expensive. Tourists will still find costs very accessible, with hostels in Quito starting at $6 a night and a set-menu lunch to be had just about anywhere for $1 to $1.50. Many imported products (shampoo and electronics) are more expensive than in the U.S., and many items, like clothes, are almost as much. Any services will be a lot cheaper (haircuts are $1 to $5, a doctor visit at Voz Andes Hospital is $8, and a guided day tour to Mindo or Otavalo is $80 for two), as will generic prescription drugs (Cipro is $6/week), and alcohol (Stoli or Skyy vodka is $7, local spirits are $2, and a liter of pilsner beer is $1 to $2 at restaurants). Trendy bars/clubs will charge a $3 to $5 cover, usually including a drink. Nice-ish restaurants may run about $5 an entree.
All food/drink prices are generally inflated in the Mariscal district and just venturing a few blocks out will take you to the "real world," with low-budget mom-and-pop restaurants.
Student discounts won't apply unless you're actually staying long enough to get your censo. Generally, only Ecuadorians are eligible for the discount.