Sooo ... David Bowie didn't make it up as a hunky-dory title for his album? My first association too, Cap
But "hunky dory" seems to have been around for ages. I think of it as slightly better than
OK or
alright. More jolly, equivalent to
spot on or
tip-top if we're going for (more archaic) Britlish equivalents - or just
very well indeed more generally.
For some reason I've got in the habit of using the term quite a lot over the last 10 or so years. Quite often kick off or end emails with "Hope all is hunky dory". Interestingly I haven't used the term much if at all with non-Brits, assuming it wouldn't be understood. Highly ironic if it actually
originated in the US.
As for the meaning, I'd assumed :
hunky = very much, great big portions of [related to "hunks of meat" and so on]
but also with a touch of (as the dictionaries seem to have it) settled, comfortable [as in "hunkering down" perhaps]
anddory = (as WO'N) golden [related to the names Dorien and Doreen and the French d'or].
FWIW