The proximity to Seoul is a big problem.
I'm not very well-versed in the effective radius and fallout potential of neutron bombs, but that sounds like a better tool for this job. Fry the Norks and leave their tubes intact...
First of all, the DPRK needs to be told that if a single artillery round or rocket falls on Seoul, all DPRK population centers and "Leader's palaces" (starting with Pyongyang) will cease to exist.
I agree completely with your suggested ultimatum. What worries me about that is who is going to deliver it and make sure that we follow through, Obambi, I don’t think so.
The best we can hope for from him would be a deep bow to Kim Jong Il and giving up the Aleutian Islands or something.