(That's the Democratic People's Republic of Korea, or "North Korea" for the rest of the planet.)
I had promised a post, but I probably don't need to make it long. Here's the short of it: Kim Jong Il isn't crazy, and isn't likely to start raining bombs down on either his Asian neighbours or the United States.
(Forget the silly ploy of saying that the US might commit an "act of war" for a moment)
He has nukes for two reasons. First, because he pretty much depends on not being ignored, for both political and economic reasons. He needs aid to have his country stay afloat, and needs the threat of the dissolution of his regime to carry enough of a penalty that other actors in the region will keep it from happening. That means South Korea and China. As long as he continues getting at least some support, he's gold. Hence the "act of war" comment- it's to keep attention.
Second, because of Iraq and Iran. He knows full well that the United States has never attacked a nuclear-armed country, no matter how belligerent they've been. As long as there's easier targets, the United States won't do so, either. This gives him a level of certainty and predictability in his negotiations that hadn't been there before- without the short- to medium-term threat of an American-led invasion of the North, he can start aiming his foreign policy towards long-term goals (whatever those might be.
There are other reasons, like personal prestige, but I think those two are the most important. They're why he won't give them up easily, and why (oddly enough for most people's understanding of warfare) he's not particularly dangerous right now. (Since he's not going to worry about a strike, he won't preempt it.)
Not that the situation shouldn't be watched, particularly for the Japanese reaction, but it's not as dire as you'd initially believe.