there's 2 different types of peso, the local one,a nd the convertible one used by tourists.
dollars aren't useless, you can still use them for tips, but if you change any up in a bank, there's a 10% exchange fee.
This is becuae the US doesn't trade with Cuba.
You can use credit cards and travellers chqs, but they mustn't be linked to an american bank - so American express TC's for example are useless.
If you take some dollar bills for tips at the airport, then change your sterling up in Cuba you'll be okay.
The post office has a credit card that you can use, which has no overseas commission charges and will prove useful. Nationwide used to do this too, but I think there's changed recenlty.
A tip I was given, which you might consider, was to buy a few cheap t-shirts in Primark to give to the friendly locals - the standard of living is poor, and they'd really appreciate it.