You raise an interesting question about the possibility of war, but there is little doubt that the US would become involved in any conflict; the US is bound by treaty to come to the aid of South Korea. While it would be difficult, the US could probably pull off three simultaneous wars. Whether or not the command and control infrastructure is there for that to be done effectively remains to be seen, but Americans have a lot of pluck and determination when they need to. As to the the loss of life, it is unavoidable -- even in peacetime, wearing a uniform is a dangerous profession.
I am hoping that the situation calms down and there are three factors that may ensure that it does:
1) History. Most of North Korea's actions are, by design, akin to the temper tantrums of a spoiled child. You know: enough to agitate, but not enough to merit serious punishment. The sinking of the Cheonan is the exception. With over 50 lives lost and the North's suspension of the naval "red phone" that had existed between North and South Korea for the past few years, things have heated up beyond the typical posturing, threats and minor provocations. Having said that, the lack of additional offensive actions and the threat of moving against any South Korean ships that cross into its waters almost make it sound that the North is retreating. (This sounds antithetical, but it's actually a retreating move.) A retreat could be consistent with the theory that the torpedo that was launched was a mistake. Perhaps a warning shot, meant to intimidate, that went awry? A misinterpreted command? Who knows? It wouldn't be the first time. Unfortunately, the stakes have now been raised and the South will necessarily respond in kind immediately to any further actions. North Korea knows this and that could be part of the reason for the distancing.
2) Regime change. Kim Jong-il is corrupt (more so than your average dictator) and has provided relatively rudderless leadership since assuming power from his father in the early 90s. Taking into account his failing health and the fact that not a whole lot has changed or improved during his time in power and you have a tenuous transition at best. Some argue that a war or even heightened military awareness would aid the handover of power from Kim Jong-il to his son, Kim Jong-un. This just isn't likely. Dictatorships need relative calm and order in order to maintain power... transitioning power is very difficult anyway, but in times of stress, it's nearly impossible. A war -- or threat of war -- would create a power vacuum in North Korea. On one side would be the untested 27-year old son of Kim Jong-il and on the other would be his military leadership. Neither side would be believe that the other has its best interests in mind and the urgency of war (even just the prospect of war) could create an opportunity for a coup d'etat. Kim Jong-il may be corrupt, but he's not entirely stupid.
3) Regional interests. China has no interest in a war... at least not now or in the foreseeable future. Its economic interests would suffer if war broke out. Its diplomatic posture would suffer if war broke out -- after all, for years China has attempted to persuade the rest of the world that it is capable of keeping peace in the East. And, if a war broke out, China would be forced to either side with North Korea (not smart) or join the UN task force that would be formed to put an end to the fighting and most likely North Korea, as it we know it (also not smart, if you're China). Since there is no ability to sit on the fence, China knows it must act to dampen the current hostilities. They'll make nice with North Korea (a strong motivation is averting the horror of finding a new-found enemy on your border with nuclear weapons) and convince the leadership that further actions will only jeopardize the North as well as China's ability to hold off the West. It's not an entirely satisfactory strategy, but for China, it defers the question of what to do with North Korea for the time being.
What happens next? Who knows. Let's hope cooler heads prevail.