So do you think the ROK is going to back down like it appears that they are going to do? I would think that they lost the initiative for a military retaliation when they refused to do anything immediately after the sinking of the Cheonan. If they chose to strike now after waiting for so long, you know that the “international community” will be screaming bloody murder about unprovoked aggression.
That won't fly much as long as Chicom balks, which it has been.
Domestically, they could cut off whatever remaining business ventures or other economic projects for N. Korea. One possible scenario is to restrict NK's ship movement in the water between southern coast and Jeju island. NK ships have been allowed to sail through this water as part of 'appeasement policy.' However, it may not pan out.
IMHO, Chia Head figures that he has Lee by the ball with the threat of ruining SK's sovereign credit rating and G-20 summit hosted in SK coming fall.
On the other hand, domestic pressure is mounting. There are many folks who already call him coward (or petty merchants who can sell out country for spare changes.) These make up the conservative political base he cannot ignore.
So we don't know which way he will go domestically.