Hill crossed the heavily fortified inter-Korean border at the truce village of Panmunjom around 11:00am (0200 GMT), the US military said.

"I would say we are in a difficult and very tough phase of negotiations," he had told reporters late Tuesday after talks in Seoul with his South Korean counterpart Kim Sook.

A dispute over nuclear inspections is threatening to undo a February 2007 six-nation deal which led the North to shut down its plutonium-producing plants.

The North has announced it will begin work to restart its plutonium reprocessing plant as early as this week. It has barred UN atomic inspectors from the building.

Despite the nuclear tensions South and North Korea have agreed to hold working-level military talks Thursday, the first since conservative President Lee Myung-Bak took office in Seoul in February and promised a firmer policy on North Korea.

Pyongyang accuses Washington of breaching the six-nation deal by failing to remove it from a terrorism blacklist. The United States says the North must first agree procedures for outside verification of a nuclear declaration it submitted in June.

The North counters that verification is not part of this stage of the agreement and accuses Washington of violating its dignity by seeking Iraq-style "house searches."

"The US has come up with a revised draft verification protocol," a diplomatic source told South Korea's Yonhap news agency. "Hill will try to reach a compromise on it."

The Washington Post has said Hill may propose that North Korea gives China -- the host of the six-party talks -- a plan that includes sampling, access to key sites and other verification provisions sought by the United States.

President George W. Bush would then provisionally remove the North from the terrorism list, after which China would announce North Korea's acceptance of the verification plan, the newspaper said.

This would allow Pyongyang to assert that the delisting occurred before the verification plan was in place.

State Department spokesman Robert Wood said Tuesday Hill was going "with some ideas on how to move this process forward" but did not elaborate.

Hill will have talks with the North's nuclear negotiator Kim Kye-Gwan but it was unclear who else he would meet or how long he would stay.

"US Assistant Secretary of State Christopher Hill and his party arrived here today," the North's official news agency announced in a one-sentence report.

The State Department said Hill was scheduled to go on to China on Friday and then Japan, but the schedule may change.

The North staged a nuclear weapons test in October 2006 but weeks later announced a return to negotiations with South Korea, the United States, China, Russia and Japan.

It shut down its Yongbyon complex in July 2007 and began disabling the plants in November that year. In return Pyongyang was to receive one million tons of fuel oil or equivalent energy aid and Washington was to remove it from the blacklist.

North Korea is estimated to have produced enough plutonium for around six bombs before Yongbyon was shut down. Analysts believe it could produce enough material for one more bomb if it resumes reprocessing spent fuel rods.

A South Korean government source quoted by Yonhap said Wednesday that increased activity had been spotted near the site of the 2006 nuclear test.

It was unclear whether the nation was preparing for a second test, or simulating activity to try to pressure the United States over the deadlocked disarmament deal, the agency said.

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