By Jon Herskovitz

SEOUL, Sept 9 (Reuters) - North Korea marked the 60th anniversary of its founding on Tuesday with what is expected to be the biggest parade of its military might just as the reclusive state appears to be backing away from a nuclear disarmament deal.

Military experts usually keep a close eye on these parades to see if the secretive North will unveil any new weapons systems while analysts wonder if the North's reclusive leader Kim Jong-il will appear amid reports that he has taken ill.

South Korea's largest daily, the Chosun Ilbo, reported on Tuesday that Kim, 66 and suspected to be plagued by chronic medical maladies, collapsed last month, citing a South Korean diplomatic source in Beijing. [ID:nSEO274708]

Kim usually attends major military parades where he watches legions of goose-stepping soldiers and waves to fawning audiences, typically in the hundreds of thousands, who shout praises to him in unison.

Kim's health is one of the most closely guarded secrets in Asia's only communist dynasty, but Kim himself at a summit with South Korea's president in October 2007 dismissed persistent media speculation that he was ill.

"I make a little move and that gets huge coverage," Kim said in rare comments. "It seems like they're fiction writers and not journalists."

The last time Kim made a public appearance was about a month ago, according to reports from the North's official media.

South Korean military officials have said they expect the North to show off hardware such as artillery systems and missiles in the parade to be conducted in the heart of Pyongyang.

The North's cabinet in a message broadcast on Monday said the state had a powerful army that "will mercilessly punish the invaders," according to a North TV broadcast monitored in Seoul.

"The North probably wants to boost the image of its military might in order to cement unity within the country and secure a better position in the denuclearisation negotiations," the South Korean daily JoongAng Ilbo cited a South Korean government official who is familiar with the North as saying.

South Korean and U.S. officials said last week that North Korea has taken initial steps toward restarting its nuclear plant that makes arms-grade plutonium, dealing a blow to an international deal aimed at ending the North's atomic ambitions.

North Korea began taking apart its Soviet-era Yongbyon nuclear plant in November as called for in a disarmament-for-aid deal it struck with five regional powers.

The North, which tested a nuclear device about two years ago, had completed most of the required disablement steps and experts said it would take a year or more for it to restart the plant.

The North stopped disabling Yongbyon in August, angered by Washington's failure to drop it from a U.S. terrorism blacklist. The United States said North Korea must first agree on a system to verify Pyongyang's disclosures about its nuclear programmes.

Analysts said the North might be trying to pressure the outgoing Bush administration as it looks for diplomatic successes to bolster its legacy. The North might also be thinking it can wait for a new U.S. president to try to get a better deal.

Under Kim, the North's already anaemic economy has taken a turn for the worse, while the North Korean leadership has used the threat of its military arsenal to squeeze concessions out of regional powers. (Additional reporting by Jack Kim and Reuters Television, editing by Jonathan Hopfner)

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