Do I need to convert dollars into Colons? Or can I just hop on the first chicken bus and pay in dollars? In Nicaragua there is no point in ever converting because dollars are as good as cordobas - I just always get my change in local currency.

Normally you have to pay public buses in Colones. Drink a coffie at the airport and pay with a small note and you'll get back Colones for the bus.

Same in Costa Rica. Just make sure you have small notes ($20 or less) in good condition (no tears, not too worn.) Once you're here though, colones are better for local purchases. The exchange is currently about 500 colones to the dollar at most businesses.
atmz in many places, give you a choise.
Expats say pay your bills in calones. Get cash in Dolares.
The calones use to slip every day. Now its both.
I tell 'em I think I was overcharged somewhere. The expats say, "Yeah. We just get use to the blue eye tax."
But then, there's times when a store owner will see you don't have quite enough cash. And they'll say,
"That's close enough." or, smile and say, "Just bring me the rest, next time."