Either we go nuclear, or we give away South Korea and 35,000 American soldiers.
Of course, if the whole thing just smolders for a while and we see that we have time to put a couple hundred thousand more troops in S.Korea (not a good idea, IMO), we might do that in the chess game.
I like William Safire's proposal--which is to pull all of our troops out of South Korea (out from under the NK guns). If NK attacks the South, we defend the South with stand-off weapons. In other words, we incinerate the North.
The US has always taken the position that our nuclear arsenal exists for a reason--and it's not just to respond to a nuclear attack. It's to win wars we have to win but can't win any other way.