North and South Korea have long engaged in a bitter war of words around this tiny truce village and lobbed propaganda at each other -- the South professing the glories of capitalism, the North once threatening to turn Seoul into a "sea of fire."

But with an unmistakable thaw on the Cold War's last frontier, depressions in the earth are all that remain of freshly dismantled political billboards around Panmunjom, the site of the armistice that ended the Korean War in 1953. Three weeks ago, the loudspeakers that once blasted competing slogans fell silent, symbolizing the new spirit of amity between North and South.

"We, from one blood and using one language, can no longer live separated," bellowed the last message from the North . "We must put the earliest possible end to the tragedy of national division."

Other changes are on the way. By October, the United States will pull most of its 216 troops from in and around the Joint Security Area at Panmunjom as part of the largest realignment of American forces on the peninsula since the Korean War. In August, about 3,600 of the 37,000 U.S. troops now based in South Korea will leave for Iraq. Plans are in place for an overall reduction in forces by almost a third by as early as December 2005.

Over the next few years, remaining U.S. troops will relocate about 75 miles south of the front lines -- putting them out of North Korean artillery range. The 41 occupied U.S. military installations in South Korea will be condensed to 23.

The U.S. military realignment combined with the rapprochement is raising new questions about the U.S. role in this part of Asia.

"The South's new relationship with the North has changed the nature of the South Korean-U.S. alliance, and we are still trying to figure out what the new one will look like," said Bong Geun Jun, a former senior policy adviser in South Korea's Unification Ministry. "The truth is, we have a better relationship now with the North and feel less threatened by them. That also means we feel less of a need to rely on the U.S."

The Bush administration has sought to isolate the North, mostly to force it to abandon its nuclear weapons programs. But many South Koreans say they believe the North should not be considered part of President Bush's "axis of evil," which also included Iran and Iraq under Saddam Hussein. Few in the South would express support for North Korean leader Kim Jong Il, whose repressive government is notorious for its brutal prison camps and the bizarre personality cult centered on Kim. But many, particularly young people with no memories of the war, perceive the North as a brother in need.

South Korea and the United States are especially at odds over whether North Korea, whose forces swept over the peninsula in 1950 before being repelled with the aid of U.S. and other troops, is as threatening as it once was.

South Korea's latest best-selling novel embraces a popular conspiracy theory: that the United States wants to suppress Korean reunification and provoke a war between the two Koreas after moving its troops out of harm's way. That book, "The Third Scenario," has sold over 200,000 copies in the seven weeks since its release.

"The essential point that has held the alliance together for so many years has been North Korea," said Don Oberdorfer, Washington-based author of "The Two Koreas" and a former Washington Post diplomatic correspondent. "And the problem is that, increasingly, there is a fundamentally different point of view between South Korea and the United States on the North. So, of course, you see a strain on the alliance."

At the same time, President Roh Moo Hyun of South Korea, elected with the support of young voters, including many who oppose Seoul's close alliance with Washington, has pursued what some of his own aides have described as a more independent foreign policy. It has led the Roh administration to forge closer ties with China, North Korea's traditional ally, which has surpassed the United States as South Korea's largest trading partner.

In the 18 months since the government in Pyongyang, the capital, abandoned the nuclear Non-Proliferation Treaty, estimates by U.S. intelligence indicate that North Korea has developed as many as eight nuclear devices. The Seoul metropolitan area, home to almost half the country's population, had long been viewed as Pyongyang's primary target, with an estimated 1 million people projected to be killed in the first 24 hours of an assault.

But even as alarm bells ring in neighboring Japan, many South Koreans no longer appear to perceive a significant risk.

Dating back five years to the "sunshine policy" of former South Korean president and Nobel Peace Prize winner Kim Dae Jung, the detente between North and South has progressed steadily.

After halting its anti-North propaganda, South Korea's Unification Ministry has agreed to begin showing some North Korean news programs on its own Web site for local audiences. In recent weeks, the two Koreas have established a new telephone hotline linking their militaries.

North and South Korean athletes will march together under one flag next month at the Athens Olympics. And South Korean economic investment in the North, once mostly limited to a tourism resort near the border region of Mount Kumgang, is now expanding into industry.

Construction is underway on a new South Korean-backed industrial park in the North Korean city of Kaesong, which lies within the range of camera lenses near Panmunjom village. Trade between the two Koreas rose to $256.2 million during the first five months of 2004, up 22.3 percent from the same period last year -- largely because of increased aid flowing from South to North.

U.S. military officials in South Korea insist the troop realignment is not connected to a North-South detente. The move is part of a global strategy to shift American forces into more mobile positions for easier deployment to world hotspots, the officials said. They also said that advances in weapons technology and capabilities no longer required U.S. forces to be based so close to North Korea.

But South Korean and U.S. officials privately admit there is an ideological gap between Roh, viewed as perhaps South Korea's most progressive leader, and the Bush administration.

"On a range of issues, Washington and Seoul have increasingly divergent interests," said a senior Bush administration official in Washington who spoke on condition of anonymity. "With the next generation of decision makers in Seoul believing that Washington is more of a threat than Pyongyang, the situation will almost certainly get worse. . . . A growing number of people in Washington feel that our troops in South Korea limit our ability to respond to a crisis with North Korea."

Still, both sides insist the foundation of the alliance remains strong, and there have been some recent attempts to ease the strain.

Leaders of the Uri Party, allied to Roh and now in control of the South Korean legislature, visited Washington this month in an attempt to dispel fears that the party is anti-American. Meeting with Roh in Seoul the same week, Condoleezza Rice, Bush's national security adviser, offered a positive outlook for improved South-North relations. She also thanked Roh for his commitment to send 3,000 South Korean troops to Iraq, especially after the beheading of a South Korean civilian hostage there last month.

But the South Koreans say they are frustrated by divisions within the Bush administration over North Korean policy. At talks last month in Beijing aimed at dismantling North Korea's nuclear programs, the Bush administration -- after prodding from South Korea -- appeared to ease its demands for a "complete verifiable and irreversible dismantling" of Pyongyang's nuclear programs without any incentives up front. Washington offered the North the possibility of energy aid from South Korea, security assurances and other benefits during a three-month test period if it promised to disclose and end its nuclear weapons programs.

But during a speech last week at a Seoul university, John R. Bolton, U.S. undersecretary of state for arms control and international security and one of the administration's top hawks on North Korea, outlined a more hard-line stance. He dismissed the notion of a negotiated nuclear freeze as a first step toward a broader deal and argued that the North Koreans should not receive incentives unless they first agree to a comprehensive disarmament agreement similar to the one recently struck with Libya -- a proposal the North Koreans have flatly rejected.

Bolton represents one powerful faction within a Bush administration split on Korea policy. A South Korean Foreign Ministry official said his "aggressive attitude" last week served to generate more confusion over what kind of deal Washington is willing to offer the North.

U.S. officials have expressed equally mixed views on the South's new ties with the North. But top South Korean officials insist that improved ties between South and North and relations between the United States and South Korea should not be regarded as mutually exclusive.

"People who think that way have a simplistic point of view," said Wi Sung Lac, senior policy coordinator for South Korea's National Security Council. "Even partners are not always 100 percent in conformity when it comes to their national interests. In our case, not moving forward in our dialogue with North Korea is something unimaginable considering the people's desire for reunification. The task before us is to promote rapprochement as well as alliance in good harmony."

Staff writer Glenn Kessler in Washington contributed to this report.

Billboards and loudspeakers aiming propaganda across the Demilitarized Zone from North Korea were removed recently in wake of thaw.Despite the new spirit of amity, North Korean troops still monitor visitors to the DMZ.