They were just rehearsals. Last week North Korea’s reclusive, frizzy-haired leader made a stunning debut on the international stage, hosting South Korean President Kim Dae Jung at a breakthrough inter-Korean summit in Pyongyang. Wearing his trademark zip-front Mao jacket, the 58-year-old Kim acted more like a quirky social director than menacing dictator. At the airport, he emerged from a throng of flag-waving North Koreans to warmly greet his erstwhile nemesis. The two Kims exchanged big smiles and hearty handshakes, then held hands during the limousine ride into town. The next day, as the pair opened a three-hour summit meeting, the North’s Kim joked with South Korean journalists. “Foreign media and Europeans say I live a hermit’s life. And they say I was liberated from hermitage by the visit of President Kim Dae Jung.’’ As the summit progressed, Kim lightened up even more–laughing about his reputation as a heavy drinker (he had 10 glasses of wine at the state dinner), lauding the delights of North Korean cold noodles and leading visitors in a rendition of the song “Our Dream Is Unification.” After lunch last Thursday, Kim escorted the South Korean president to the airport, gave him a bear hug and stood waving on the tarmac while his visitor’s jetliner took off. kim jong il shock, blared one summit headline in Seoul. “A new day is beginning,” declared the southern leader on his return home.

It was no overstatement. With the precision of the Hollywood musicals he so admires, North Korea’s mysterious leader choreographed last week’s summit to erase his reputation as a recluse, fanatic and closet terrorist. He displayed humility and poise heretofore kept hidden. And when the meetings concluded, he signed a sweeping joint communique that, if implemented, would end the world’s last cold-war standoff.

The accord is vague–especially on the core issue of reunification–but encouraging. It sets a framework to reunite families divided by the 1950-53 Korean War, expand inter-Korean business and cultural ties and “independently resolve the issue of national unification.” But the document’s final clause is the most important. It states that Kim will visit Seoul “at an appropriate time” for a reciprocal summit–a journey few North Korea watchers believed he would ever agree to. “It was like looking at the dark side of the moon for the first time,” gushed Kim Young Soo, a professor at Seoul’s Sogang University. “We thought Kim Jong Il was a weird person. But now we know he can be open and candid and straightforward.”

But is he ready to break a bitter 50-year political deadlock? South Koreans are energized by the prospect. Park Jang Wan, a 43-year-old Seoul shop owner, was awestruck. “I never thought I would ever see anything like this in my life,” said Wan. “This is the best news our country has had in years, perhaps decades.” Divided families now believe they’ll soon be reunited. Southern industrialists are giddy to expand northward. And millions of citizens now harbor the wildly optimistic notion that unity is just around the corner. President Kim quickly sought to dampen the enthusiasm. In his first post-summit speech, he cautioned that the immediate goal is “coexistence and coprosperity” and that unification “will take time, so we should be patient.” Experts agreed. “Kim Jong Il showed us he is in full control of his marbles,” says Lee Chung Min, a political scientist at Yonsei University in Seoul. “But that does not mean we’ve reached an epoch-making turning point where everything is done and we’re on the home stretch toward unification.”

Still, something monumental did happen in Pyongyang last week: Kim Jong Il signaled the world that his failed Stalinist regime must change to survive. Like China’s Deng Xiaoping in the late 1970s, North Korea’s leader is seeking solutions outside the rigid confines of official ideology–in his case, his father Kim Il Sung’s misguided philosophy of juche, or self-reliance. North Korea is now courting foreign investment, opening capitalist-inspired special economic zones and sending top technocrats to learn Western-style accounting, banking and trade. This year Pyongyang has forged diplomatic relations with Italy and Australia and stepped up efforts to normalize ties with its former colonizer, Japan. In Washington, meanwhile, the Clinton administration is set to ease sanctions and allow most forms of trade and investment. “The North is portrayed as a hermit kingdom,” says Moon Jong Yin, one of two scholars on the South Korean delegation to Pyongyang. “But I saw signs of opening.”

The two Koreas must slowly build their new relationship. The armistice that ended the Korean War in 1953 left the two sides divided in every way. Today, with more than a million soldiers, sailors and airmen still manning the border, flare-ups are a very real risk. North Korea is believed to have stockpiled a massive arsenal of chemical and biological weapons. Two previous peace initiatives (in 1972 and 1991) both failed to appreciably reduce tension along one of the world’s most dangerous frontiers. In other words, ending 50 years of enmity is no easy thing.

But doing that is Kim Dae Jung’s life mission. Throughout his tumultuous careers as a dissident, political prisoner and now president, he has struggled to realize Korea’s unification–arguing against military options and in favor of dialogue and peace. After winning the Blue House in 1998, Kim unveiled a “sunshine policy” of openness toward Pyongyang. It spurred private investment, jump-started tourism and thawed attitudes in the North. Critics in Seoul derided Kim’s “one-sided love affair,” but he held to his soft line and eventually coaxed Pyongyang into accepting a summit. What won Pyongyang’s confidence was Kim’s offer, articulated during a March speech in Berlin, to provide government-to-government aid to help revive the North Korean economy.

For Kim Jong Il, the gift proved too rich to refuse. Economic collapse and a deadly famine have reduced his Stalinist bastion to the status of a global beggar. Today North Korea survives on relief grain and free fuel, most of it donated from neighboring China. Development experts in Seoul say Pyongyang needs more than $10 billion in outside investment just to revive its antiquated farms, factories and power grid. That price tag is too big for its traditional allies, China and Russia. So Kim now looks to Seoul and, to a lesser degree, its Western allies to keep his economy afloat. But mindful of socialism’s collapse in Eastern Europe, he’s not likely crack open the door to his totalitarian country too far, or too quickly. That would risk a loss of control.

The two sides have somewhat different ideas about unification. The communique outlined contending proposals but set no negotiating agenda or deadlines for unity. Pyongyang, it said, favors a “loose form of federation” with a central government that initially cedes most power to regional governments in the North and South. Seoul, meanwhile, advocates a “confederation” in which the center is largely ceremonial and both North and South retain separate armies and diplomats. After the summit, President Kim revealed that both positions had grown very close and, as a result, “there is much common ground.”

Kim’s exuberance masks an uncomfortable truth: South Korea can’t afford a quick reunification with the North, even if it were possible. Bailing out North Korea would be astronomically expensive–costing upwards of $1 trillion. Before German unity, for example, West Germans were twice as wealthy as their eastern brothers. In Korea, however, the economic disparity is much greater. Based on average monthly income, South Koreans earn 100 times more than northerners. While South Koreans chat on cell phones and sip imported whisky, many northerners have no food to eat. An estimated 1 million have died of starvation since famine gripped the country in 1995. In Berlin, Kim outlined a plan to effectively rebuild the North’s economy prior to reunification. Said a U.S. government official last week: “The worst thing the Koreas [could have] is a war. But the next worst thing would be North Korea wanting to suddenly reunify with South Korea in its current condition.”

Pyongyang, in fact, wants it both ways. In a model that parallels China’s earliest experiments with capitalism, Kim now aims to restrict foreign investment to specific zones that insulate his people from destabilizing change. The prototype is the Rajin-Sonbong Economic and Trade Zone established in the early 1990s in northeast Korea, near the borders with Russia and China. It boasts deep-water port facilities, duty-free transshipment services to China and even a casino popular with tourists. Another example: Hyundai’s cruise-ship tours to scenic Mount Kumgang. In 1998 the South’s biggest conglomerate agreed to pay $900 million over a six-year period for the exclusive right to develop the mountain as a recreation and convention center. Since then, almost 300,000 southerners have visited the region–which is walled off from local people.

South Korea’s four largest conglomerates, or chaebol, are keen to do their part. Executives from those companies accompanied President Kim to Pyongyang, visiting several factories. Hyundai has proposed a massive industrial zone on North Korea’s west coast, offering to import hundreds of small South Korean manufacturers to tap the North’s cheap labor. Although North-South trade rose 50 percent in 1999 to $340 million, the lack of precise trade rules or direct transportation links makes inter-Korean commerce a high-cost, high-risk endeavor. To change that, Seoul has proposed a 25-kilometer rail link across the demilitarized zone.

In Seoul, the most pressing humanitarian issue is family reunions. President Kim faces pressure from about 2 million families split up by the war. Most survivors are in their 60s or 70s now and still cling to hopes of finding long-lost loved ones before death. The summit accord sets Aug. 15 as the deadline for resuming reunions. To encourage Pyongyang’s compliance, Seoul has agreed to repatriate about 50 spies who want to return to the North. Seoul has also asked Pyongyang to return hundreds of Korean War POWs–captives the North has never acknowledged holding. Experts warn that disputes over spies or POWs could yet stall reunions.

There are other major stumbling blocks. Chief among them are the North’s ballistic-missile program and Seoul’s alliances with the United States and Japan. North Korea’s legislative head, Kim Young Nam, asked President Kim if Seoul’s close ties with Washington and Tokyo did not, in fact, violate the principle of solving the unification question independently. President Kim was forced to defend his allies, saying they would ultimately assist, not harm, North Korea. The two sides have not publicly acknowledged any talks on mutual troop reductions along the 250-kilometer DMZ. Nor did they discuss Pyongyang’s steadfast opposition to the presence of 37,000 U.S. combat troops in South Korea.

In Washington, Kim Jong Il’s emergence as a flexible leader vindicates the Clinton administration’s special envoy to North Korea, former Pentagon chief William Perry. He visited Pyongyang a year ago and declared that Washington could do business with the regime. Since then, the administration has made greater efforts to engage North Korea. In his subsequent report to Congress, Perry advocated lifting trade sanctions, expanding ties and eventually establishing full diplomatic relations with North Korea in exchange for Pyongyang’s commitment to halt its missile programs and otherwise moderate its behavior. Were that to happen, there might be less need for the Clinton administration’s proposed $60 billion national missile defense shield, designed to protect the United States from attacks by “irrational” dictators. Until now, Kim Jong Il was the poster child for irrationality. His new warm, fuzzy image might change that equation.

In South Korea, where the summit met with euphoric approval, the missile-defense debate could fan smoldering anti-Americanism, mainly directed at U.S. military bases on the peninsula. In Seoul, some mainstream intellectuals now argue that U.S. GIs stationed in South Korea threaten–rather than safeguard–peace. “As the two Koreas become friends, Washington will have to ask its people whether it’s worthwhile to keep U.S. troops in Korea,’’ said Cha Seung Ryul, who heads an alliance of 127 civic groups lobbying for more Seoul government jurisdiction over U.S. troops. Speaking to CNN, America’s ambassador to Seoul, Steven Bosworth, sought to strike a delicate balance. He called the summit “the best hope we have had for reconciliation and reunification,” but added: “Diplomacy works… because it is supplemented by deterrence.”

Will North Korea continue on its moderate course? Kim Jong Il’s dramatic summit performance hasn’t obscured his record for promoting terrorism and selling missiles to outlaw states. One summit cannot solve problems that have simmered for half a century. It will take direct links, mutual disarmament and real North-South engagement to tear down the DMZ and bring the two Koreas together. And those changes can happen only over years, not in a few heady months. In the end, the summit was an opening act–more about symbolism than substance. But it could herald a dramatic new era for Korea.