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By Jon Herskovitz

SEOUL, April 3 (Reuters) - North Korea said on Thursday it was ready to give up dialogue and attack the South, ignoring a call from its wealthy neighbour's new president to calm down and get back to serious talks.

In the past week, the North has warned it could reduce its neighbour to ashes and hurled insults at President Lee Myung-bak, who took office in February with a pledge to end the free flow of aid unless Pyongyang's communist leaders behaved.

And late on Thursday, it accused the South of raising tensions by sending three warships into its waters. South Korea's Defence Ministry denied the charge.

Earlier, Pyongyang sent a two-sentence letter from its military to the South warning of a strike, which was followed by a separate report in its KCNA news agency that the peninsula was on the brink of war.

"South Korea's military should clearly be aware that the position of our revolutionary military is to counter any attempt to carry out a pre-emptive attack with an advance pre-emptive attack," KCNA said.

"(The South) can never be cleared of the responsibility for suspended dialogue and contact between North and South and for the implementation of a travel ban," it added.

North Korea's military has threatened pre-emptive attacks for years in response to annual, joint U.S.-South Korean military drills it said were pushing the peninsula into war.

Its actions over the past week, including a missile launch and expelling South Korean officials from a joint factory park north of heavily armed the border, are the most aggressive against the South in a decade.

But there is no sign so far that the North has gone any further than furious rhetoric in what many analysts see as an attempt to pressure South Korea and its U.S. ally into making concessions to appease it.

A South Korean working at the Kaesong industrial park said by telephone: "There has been no change in operations here."

WAR OF WORDS

Lee has said he will end the free flow of aid North Korea has become used to over the past decade unless it mends its ways and, in particular, makes progress on nuclear disarmament.

"We propose that the two sides engage in sincere dialogue, and in order to do so, we believe the North has to move away from its previous ways and actions," the presidential office quoted Lee as telling military chiefs.

South Korean government officials saw the latest statement as a repetition of threats North Korea made a few days ago, adding there was no scheduled dialogue between the two to be suspended.

KCNA said three South Korean warships entered North Korean territorial waters on Thursday morning in "a brigandish act to defend the illegal 'northern limit line'".

The nautical border known as the "Northern Limit Line" was set unilaterally by U.N.-led forces at the end of the 1950-53 Korean War and has been recognised since by the South's military as the de facto border.

North Korea declared the line in the Yellow Sea invalid in 1999. Dozens of sailors from both Koreas were killed in clashes across the line in 1999 and 2002.

The flare-up between the two nations technically still at war, has had little impact in the South. Its financial markets, long used to fiery exchanges from across the Cold War's last frontier, have mostly ignored the latest hostility.

The North also threatened to step away from its obligations in a deal with regional powers, including the United States, aimed at ending its atomic arms ambitions.

The United States, which has some 28,000 troops in South Korea, will be the first country Lee visits since taking office. Lee, who has made stronger ties with Washington a priority, flies there later this month.

"This is the North Korean way to put pressure on the Lee Myung-bak government to make its policy shift," said Park Young-ho, of the Korea Institute for National Unification.

North Korea has created its "own version of linkage" where it says inter-Korean troubles are compounded by Seoul's alliance to Washington, said Park, an expert on the North. (Additional reporting by Lee Jiyeon, Yoo Choonsik and Rhee So-eui; Editing by Jonathan Thatcher and Alex Richardson)

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