If the weapon was designed as a 500kt device (highly unlikely, very small nukes require advanced technology) it is indeed a terrible weapon because it can be easily concealed and transported, or used as a tactical battlefield weapon at the battalion level.

However, for a first-ever test by a nuclear virgin, one would expect a much more powerful device. This suggests that the weapon malfunctioned, even though tested under ideal, controlled conditions. To consider going to war with unreliable nuclear weapons would be suicidal, they might not work at all in the uncontrolled environment of real nuclear combat. Not only do they have to go back to the drawing board, they have used up some of their expensive fissionable material and have precious little to show for it. The NKs got the worst of both worlds, they pissed off the world and they still don't have a credible nuke. I suspect heads are rolling in Comrade Kim's nuclear program.