I like your plan. I also like Krauthammer's plan. He says we should tell NK that until they verifiably end their nuke program, we will treat any terrorist nuclear detonationanywhere on Earth as a nuclear first strike against the United States by NK, and respond accordingly.
I believe that message was already delivered in so many words per Kim(mentally)Il's recent apology.
He's still ashes should anything even look like it's going to go boom somewhere.
Oh, and the Chinese really aren't interested in some wack-job NK dictator getting all bent out of shape when they are investing so much in the upcoming Olympics. Someone detonating nukes next door simply wasn't "appreciated" by the Chi-Coms.
There was so much in play and it has buried so fast, we'll never know the truth of things.
In the end, I think your thoughts approached pretty close to what really happened.