So a scruffy looking guy walks into the diner, opens up his red and black plaid jacket, and reveals several sticks of dynamite strapped to his chest. He holds up his hand to show the spring loaded detonator, walks over to the counter, picks up the salt shaker and throws it, hitting the waiter.
"Give me a cup of coffee," he says, "and one of those cinnamon thingies."
It seems like a small price to pay, so the staff accomodates him. Unfortunately, he moves into a booth and starts tinkering to build a more powerful bomb - a nuke - while continuing to be obnoxious and extorting free food.
Such is the situation South Korea finds itself in. At the moment, the crazy guy's capability is pretty much limited to blowing up Korea, but he has his sights on the world, and Japan, at least, is very much at risk.
If the South, and the world, fail to respond, the bad behavior will continue and likely escalate, if world history is any guide, and any response risks catastrophe. At the moment, the South Korean response has been very vague. Would it be better for the West if a precise table of responses were published? If you get into that game, you had better be prepared to escalate, and fast.
I suspect that the leadership of North Korea values its nukes and missiles above its people, so if you get into the escalation game they need to be high on the list of targets.