[jcx]

The biggest mistakes were made by Truman. Gen MacArthur's masterstroke at Inchon had the communists reeling, when prior to that they had nearly secured control of S. Korea. China then entered the war and was actively fighting US troops. On the offensive and kicking the communists' asses, MacArthur wanted to take the war directly to China and could have likely broken their will to fight had he been allowed to do so. Truman instead fired him and would not allow US forces to bomb/attack anything in China itself, even though the US was directly engaged with Chinese troops in Korea. Safe in the knowledge the US would not bomb/attack any of its infrastructure or supply lines in China, the communists were able to beat back the US and the war carried on for 2 more bloody years.

I believe had the war been taken directly to China in the form of armed incursion into Manchuria coupled with B-52 bombings of China's major cities and industrial complexes, the Chinese would have tired of the war and withdrawn. Hell, even if they were simply faced with the threat of US invasion they may have backed down (Beijing is not that far as the crow flies from Korea). But Truman took that completely off the table, and they were emboldened.

Once the cold war got into full swing, I really don't see what could have been done differently. The N. Korean regime is as Xenophobic as they come and diplomacy with the Kims is all but impossible. Besides, the cold war is still very much alive along the DMZ. There is no peace agreement between the Koreas, and they are still technically at war.
Short of military action, which I would not support, there is little chance the communist regime will fall peacefully, a la E. Germany. This is because there are a few important differences between N. Korea and the countries of the Soviet Bloc:

1. The Kim regime could care less if a few million peasants starve. As long as the military is fed and the top brass are kept in luxury, the status quo will prevail. Enough hard currency is raised through weapons sales and drug smuggling (through diplomatic pouches, no less!) to take care of this need. Honecker, Ceausescu and the gang did
not have this luxury because of the reasons given in item
#2.

2. Kim Il Sung created perhaps the most successful cult of personality the world has ever known. He is literally a diety in N. Korea, despite being dead. Unless you are a member of the tiny elite, there is no access to the outside world whatsoever. Jamming devices prevent any S. Korean broadcasts from being heard in N. Korea. European communists never had the 100% control over information that exists in N. Korea, and they certainly never convinced the population they were demigods.

Sadly, I think the status quo will continue in Korea for a long time to come. Neither side desires armed conflict or it would have happened decades ago. The S. Koreans really don't want N. Korea to collapse, because the investment required to bring the standard of living of their countrymen up to 1/2 of theirs would bankrupt them. The real losers are some 20 million N. Koreans, victims of the biggest mindf*ck in the history of mankind.