North Korea is still a fourth rate country that is halfway collapsed. They could cause a lot of damage to South Korea but I think they would lose against South Korea in a war. The risk of North Korea (NK) giving/selling nuclear weapons is not likely. Kim Jong Il and his inner circle are playing a game of brinksmanship, but if they actually let the nukes get out or actually used them that would force action from the US and others. Action from the US and others would be the death or at least deposement of the current rulers of North Korea.
The bigger risk as pointed out by Kaplan in the Atlantic magazine is the chaos of North Korean leaders losing control.
The situation is about money and who will pay the trillions to clean up North Korea. North Korea got propped up in the mid-90s to delay dealing with a collapsed North Korea.
China would be willing to take over the top part to get some better ports.
Kim Jong Il has not been acting that crazy from what I have seen. He and his inner circle are acting in the criminal self interests of a small group. They are a gangster state using blackmail, arms dealing and counterfeiting. Unlike Iran they have no larger religious agenda or expansionist aspirations. Billions of dollars a year to manage what could be a trillion dollar problem.
The N Korean nukes will only get loose if Kim Jong Il and his crowd lose control.
In terms of lives and numbers, millions of N Koreans dead over the last decade. Millions more at risk from starvation.
Millions of S Koreans at risk in a war situation.
Tens of thousands of people outside at risk if the nukes got loose. Their nukes are not that good and are unlikely to get delivered in a way that would cause maximum casualties.
Thousands of US and other troops could die by getting into the mix of a Korean War.
Patience to manage and contain the problem is a decent strategy. Plus try to cut a deal where they walk away. Push ahead on remote nuclear material and bomb detectors that could be used to make a safe surgical first strike possible, but then have and implement a plan for taking over establishing order after the NK collapse.