Is it likely more posturing on both sides? Yes. The North still does not have the capacity for winning a war of aggression against the South (though it could possibly win a guerrilla war against an occupier).
However, it also seems to speak to a schism in the North Korean government. Other parts of the government are talking reconciliation, with the North Korean Red Cross having just accepted food aid. We've also seen North Korean officials making conciliatory gestures to both South Korea and the US. This, much like the earlier naval incident, shows that the North Korean military may not be as interested in reconciliation and is instead trying to sabotage all such efforts. (And as Robert Farley says, all nations have their neocons, and the North Korean ones will naturally interpret all actions as part of the unchangeable plot to destroy the freedom-loving North Korea.)
I think the South Korean threat was likely a bad move, especially since everyone know that South Korea will act pre-emptively if need be and because everyone knows that nuclear attack on South Korea would be suicide. But, as always, we'll just have to see what happens.