North Korea told South Korea on Monday that it should not meddle in a standoff over the communist North's suspected nuclear weapons, calling it a dispute between itself and Washington.

In a second day of Cabinet-level talks in Pyongyang, South Korean delegates again demanded that North Korea (search) abandon any atomic weapons development, citing a 1992 agreement to keep the Korean Peninsula nuclear-free.

The North refused to discuss the nuclear issue.

"The Northern side reiterated that the nuclear issue is a matter between the North and the United States," said a statement from the South Korean (search) government. "But they said they wanted to resolve the matter peacefully."

A senior U.S. official said North Korea, during talks in Beijing last week, claimed to have atomic weapons that it might test, sell or use, depending on U.S. actions.

Secretary of State Colin Powell said Monday the Bush administration is reviewing a North Korean proposal designed to allay U.S. concerns about the nuclear weapons and missile programs.

"They did put forward a plan that would ultimately deal with their nuclear capability and their missile activities but they of course expect something considerable in return," Powell said.

Powell did not reveal the North's proposal, but South Korea's JoongAng Ilbo newspaper, quoting unidentified diplomatic sources, reported that North Korea proposed to give up its nuclear programs in return for a nonaggression treaty and normalization in "political and economic relations with the United States."

The Bush administration has ruled out such a treaty, but U.S. officials have said some form of written security guarantee could be possible. North Korea says it fears being invaded by the United States following the Iraq war.

South Korean President Roh Moo-hyun said Monday that when he meets Bush in Washington on May 15, they will discuss cooperating "to find a complete and peaceful solution to the nuclear issue," Roh's office said in a statement.

Powell also denied that North Korea explicitly threatened to test a nuclear weapon.

"They never used the word 'test.' They said that it is the kind of capability that one can display in one way or another, and we're taking all this seriously," Powell said.

The South-North talks, which began Sunday, are scheduled to end Tuesday.

During Sunday's talks, North Korea called for "united efforts of all the Koreans" to "reject the unilateral strong-arm action of foreign forces ... and prevent the danger of war," said the North's official news agency KCNA.

Such remarks reflect the North's long-standing policy of driving a wedge between the South and its main ally, Washington.

The North tried to shift the focus of the talks to linking cross-border railways and other economic projects with South Korea that are part of a reconciliation process that grew out of a historic North-South summit in June 2000.

During a visit Sunday to an unidentified "front-line unit," North Korean leader Kim Jong Il (search) was satisfied that his soldiers were ready to repel "any surprise attack of the enemy at one stroke," and gave "guidelines in further increasing the unit's combat capability," KCNA said.

It said North Korean soldiers were determined to "become human bombs in safeguarding the headquarters of the revolution and wipe out any invaders at one stroke."

Washington believes North Korea has one or two atomic bombs and may be trying to make more. North Korea has indicated it would never abandon its nuclear programs unless Washington signs a nonaggression treaty.

During the Beijing talks, U.S. officials said North Korea claimed it had reprocessed 8,000 spent nuclear fuel rods -- a key step in producing nuclear weapons that could yield several more bombs within months.

But Powell said there still wasn't any evidence that North Korea had actually done so.

"Our intelligence community still cannot give us any validation or confirmation of what North Korea has said at various times and at various places with respect to reprocessing," Powell said.

Washington has said it wants the "verifiable and irreversible" elimination of the North's nuclear weapons programs.

Last week's talks in Beijing were the first high-level U.S.-North Korean contact since nuclear tensions spiked in October, when Washington accused Pyongyang of having a secret nuclear program in violation of a 1994 pact.

Meanwhile, North Korea accused Japan of destabilizing the region by taking part recently in joint air force mid-air refueling exercises with the United States.