North Korea announced that it has nuclear weapons.  While this is hardly news, public announcement makes it important.  As I mentioned in a Dave Winer's morning coffee podcast (can't find the link just now but, fyi, it was recorded during a NDA-covered event at Microsoft ;-p), I don't think North Korean regime has any intentions to give up it's nuclear weapons nor shutdown it's nuclear programs.  I believe they see the six-nation talk only as a way to buy time and gain resources while the talk is going on.

Serious military and economic confrontations with China lie in the path to nuclear weapon free Korean peninsula.  The biggest ball in those confrontations, economy, will also be the best card to play in a game of who has more to lose: China or US.

IMHO, the best strategy is for Bush to not only talk about possibility of direct military actions but also sharply escalate war talks, enough to make economic losses seem as real as the sunrise tommorrow.  In simpler terms, Bush has to bluff seriously to force China to throw away the hand: North Korea.  Then he has to blockade North Korea, with China's cooperation, until North Korea implodes.  Lots of sacrifices will be needed, but I think this is the best although not the most wishful solution.