Building tension in the Yellow Sea

In March, the South Korean warship Cheonan was sunk, and South Korea held the North Koreans responsible.  North Korea has denied that they were involved, but it has started a new conflict between the two nations.  North Korea was not censured by the United Nations, as China blocked the incident being blamed on them.  China has urged countries in the region to put the incident behind them.  The United States has suggested that it is willing to come back to the negotiating table with North Korea, but only if it shows that it will make serious changes in its policies, and that it is serious about denuclearization of the Korean Peninsula.
 
 
 
This issue has spread out from just being an issue between North and South Korea, and has gotten the United States and China involved as well.  The U.S., maintaining its relationship with South Korea, agreed to joint naval and air exercises in the Yellow Sea, to deter the North from considering another attack on the South.  As the naval exercises were going on, North Korea fired over 100 artillery rounds on its side of the border of the Yellow Sea, all of which landed on their side.  This came after North Korea warned both parties that it would “react with strong physical retaliation to the anti-submarine drill to be staged by the group of traitors in the West Sea.”
 
The issue has escalated further, as the North Koreans have now captured a South Korean fishing boat in the Sea of Japan.  Amongst those captured on the fishing boat are three Chinese, which has now caused China to become concerned by North Korea’s actions.  They have stated that they are trying to check the reports to see if this information is correct.  Should something be done, before things become worse?  Are negotiations the best solution to calm things down?  What would North Korea have to do to show the U.S. that it is serious about denuclearization, besides starting to take apart their nuclear program?  Is this too heavy a restriction for the start of a new set of talks?