I'm not so sure that the threats are entirely empty; their leadership is a bit unstable to say the least and they could quite easily believe their own rhetoric.
Their military may not have the more sophisticated equipment that is available to the South Koreans, but that is not a guarantee for success. They certainly have more people geared up for war; and based on what little I have seen, they are likely to fight fanatically. It could potentially make the situation in 'Stan look like a tea party.
Just because they haven't made good on their threats should not be a guarantee that they never will. Plus, when people are constantly rushing up to the line then pulling back at the last second, it wouldn't take an awful lot for someone to make a mistake and go further than they planned by accident.
Yes they probably would lose; but again, they really do believe that the Western countries are weak, flabby, lacking in moral fibre etc. (Not saying they are right, but an argument could be made...) They might well believe that they could gain ground, then stop and hold that ground without serious retaliation. Saddam Hussein did that in Kuwait thinking that he could get away with it; and he was no where near as crazy as the North Korean leadership.
I think that you are right that it is ploy to get some more supplies (he's a young man, probably needs a lot more pr0n). But the concern should be if someone does go off half-cocked and starts a bloody conflict by mistake. Then it could get out of hand very quickly; and we would need a lot of very cool heads to prevent it escalating.