This is a partial transcript from "On the Record," October 11, 2006, that has been edited for clarity.

GRETA VAN SUSTEREN, HOST: Joining us from D.C. is Bob Woodward, the author of the new blockbuster book, "State of Denial," which is number two on The New York Times best seller list, welcome Bob.

BOB WOODWARD, AUTHOR, "STATE OF DENIAL": Thank you.

VAN SUSTEREN: Bob, we're going to talk more in depth about your book in a moment but first I want to talk to you a second about North Korea.

WOODWARD: Certainly.

VAN SUSTEREN: These new sort of fighting words by North Korea, why do you think now? Do you have a theory on why they tested the missiles in July and now they're doing the nuclear test?

WOODWARD: Well, the best intelligence has indicated that they've had the bomb for some time and probably have a half dozen or more. I think there's a lot of theater in this and obviously the North Koreans, their leader Kim Jong Il, feels that he gets lots of points and gains stature on the world stage by doing something like this.

I remember interviewing President Bush about four years ago and he actually said of the North Korean leader, he said, "I loathe Kim Jong Il because of what he has done to his people."

So, it's a volatile issue. In terms of the reality of the arms race, I'm not sure it advances much but in terms of the theater of this leader who really is like no other leader in the world, he's trying to put himself on center stage and, of course, he's done it quite effectively.

VAN SUSTEREN: Bob, your book "State of Denial" concentrates much on Iraq but there is also mention of North Korea. From your research and your reporting how much has North Korea consumed the Bush administration?

WOODWARD: Well, I think it's been kind of a side issue and clearly the war in Iraq is the defining event of the last three and a half years, really the defining event for the Bush administration.

We have 147,000 of our fellow citizens over there in a war and my findings from working on this for two years is not clear what the strategy is and things are much worse than they have told us.

VAN SUSTEREN: In terms of North Korea, is there any one person in the administration who has been more concerned about it than another?

WOODWARD: Well, I think they're all concerned about it. I mean clearly The Pentagon and Secretary Rumsfeld have to worry because we have a Korean war plan. We have so many troops in South Korea who could get engaged instantly in a hot war.

Of course, the diplomatic track is emphasized now and, as the president said today, that's what he's relying on. So, Secretary Rice has clearly given it a lot of attention.

I'm not really sure what's going on here and I go back to the theme this is a crazy leader doing something to wave the bloody shirt around. And, you know, I don't know whether that means he's going to use these weapons, whether he's going to sell them, whether he just wants to kind of say, "Look at me, I'm a big man."

VAN SUSTEREN: Well, he certainly has used interesting rhetoric and he certainly has ratcheted up in the past few days. Bob, stay right there. We have much more for you after this break. We want to talk about your new book "State of Denial" in greater detail.

(COMMERCIAL BREAK)

VAN SUSTEREN: War rages on in Iraq and despite heavy criticism, today President Bush reaffirmed that while he's president the United States will stay the course and that means we won't leave before the job, in his words, is done. But has the president been candid with the American people about the war in Iraq?

Joining us from D.C. is Bob Woodward, the author of the new blockbuster book "State of Denial," which is number two on The New York Times best seller list. Bob, in terms of the president, the vice president, the secretary of state and the secretary of defense, in public, in my opinion they're very certain about the strategy and their decisions. In private, are they the least bit reflective wondering if we are doing the right thing?

WOODWARD: No, I think they're convinced, you know, we're on this course. As the president said today in his news conference the stakes could not be higher and I think that's right. This is really high stakes, not just for Iraq, it's about what our position in the Middle East and the world is going to be.

And, I've spent two years on this and looked at the secret record of meetings and memos. And then we know what they say publicly and there is a giant disparity. We have not been told the truth unfortunately about what Iraq has become.

Somebody just who came back from Iraq spending months there called me and said, "It's like a Mad Max movie," the level of violence. You could see today in the president's comments about this there was a somberness about it. He knows how bad it is. As a leader he has to be optimistic.

My analysis is as we know the homeland at least currently in the United States is not threatened. People can deal with the truth. Presidents are strongest and best quite frankly when they are the voice of realism.

And, I think after this coming election we're going to get a dose of realism, whether it's from the administration or not. I don't know. It's going to come from Jim Baker, who is doing this study. It's going to come from Senator Warner and Republicans, who are deeply disturbed about what's happened.

VAN SUSTEREN: Have any Republicans in the last year from your reporting actually made a trip to the White House and said, "Look, the American people aren't getting it straight or we're having a hard time, you know, keeping sort of the Republicans in line because there is, you know, disagreement on the Iraq — on the strategy in Iraq?"

WOODWARD: Senator Hagel, a Republican, I report in detail how in 2004 he went to the president, went to a lunch, a Republican Senate lunch at the White House, took the president aside and said, "Mr. President, you are bubbled in. You are not listening to what people are saying. You are not opening yourself up to the views of others in a serious way."

And, the president said, "Well talk to Steve Hadley, my national security advisor." And, Senator Hagel did. And then he came out publicly and said the White House has lost touch with reality.

These are not Democrats. These are not critics of the administration. These are not people who are in think tanks. These are the very own people that the president has put in these positions, generals and others who just say we've made a series of mistakes over three and a half years and we need to look reality in the face quite frankly.

VAN SUSTEREN: What's the relationship like between Secretary Rumsfeld and the president?

WOODWARD: Quite close. As I report and as has been confirmed, the White House Chief of Staff Andy Card at least twice tried to get Rumsfeld replaced because Card was getting reports that Rumsfeld was increasingly arrogant in dealing with people in Congress and obstinate. The president declined to do this. The president told Card he felt Rumsfeld has a hard job, has done it very well, had not been insubordinate.

Andy Card went to the point of recommending Jim Baker saying, "Mr. President, put Jim Baker in" and likened him to Roger Clemmons, the great former Yankee pitcher and said, "Baker is like Clemmons. He can still pitch. Get him in the game. He's a diplomat. He will know how to work our way out of this." The president decided not to at this point.

VAN SUSTEREN: All right, Bob, thank you. The new book "State of Denial," number two on The New York Times best seller list and certainly is creating a lot of reading in Washington, thanks, Bob.

WOODWARD: Thanks.

Content and Programming Copyright 2006 FOX News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2006 Voxant, Inc. ( www.voxant.com), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon FOX News Network, LLC'S and Voxant, Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.