1

Is this sentence grammatically correct?

Does the usage of this word correct?

or I must use "Is" instead of "Does"?

4

You must use "is" in this case.

As a statement you would say "The usage is correct". To make a question with a "to be" verb you need the "to be" verb. So: "Is the usage correct?"

You use "do" to make questions with other verbs. For example:

"The usage makes sense" --> "Does the usage make sense?"

"That usage gets under my skin" --> "Does that usage get under your skin?"

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