Mutually assured destruction is not a problem for terrorists or suicide bombers who feel that their own martyrdom would be of benefit to them.
It's interesting how many Western movies include the heroes essentially committing suicidal acts. That's commendable. Terrorists...well they're just irrationally crazy!
Further, to carry out a terrorist plot the actors usually need substantial support by people who aren't as...committed (see: Osama himself). Syria, for instance, was often considered a major sponsor, or at least facilitator, of terror, but since the Afghanistan war they've been one of the most committed to making sure terrorism is stopped. There are a lot of such middlemen who have selfish reasons to ensure that terrorism does not occur.
I find the concept, though, that nuclear weapons are only sought because of some sort of incorrect illusion of their effectiveness to be simply shocking. Does anyone really believe that? Does anyone really believe that even at the most "pessimistic", a nuclear weapon would be at least a thousand times more effective than anything any terrorist could dream up?
As a whole, this is true of the leadership. This is virtually true by definition because being that inhuman and single-minded is incompatible with leadership and anybody who tries fails as a leader. Unfortunately, the way they lead is to fire very very potent memetic weaponry around with relatively wild abandon and they do unfortunately end up producing True Believers in quantity. We know this, because a suicide bomber almost by definition has to be a True Believer, and suicide bombers definitely exist. I would tend to agree that most terrorist leadership would rather use the nuke as a stick to beat people with rather than fire it but I am uncomfortable with the scenario in which one or more True Believers come to believe that their leadership are actually traitors and in their True Belief fire the weapon anyhow. Terrorists build their structures around some very toxic and volatile belief structures and we are justified in being very concerned about the combination of that and nuclear weaponry. Perhaps not "terrified" but certainly a matter of justifiable international concern. (I would reserve terrified for 5-15 years in the future when biological warfare becomes easy enough for them.)
It only takes one True Believer.
It isn't world-ending apocalyptic if North Korea launched its entire arsenal, but it would be incredibly devastating, which is exactly why the world treats it with such kid gloves. No one is overstating the concern regarding that, and a nuclear attack on Tokyo or, less likely, the West Coast of the US, would be horrifying.
Just to go back to Japan for a moment, note that in most world conflicts the decision to be aggressive or not is a very selfish one from the perspective of leadership: Leaders and peoples who feel that they and their family are impervious, or at least reasonably impervious, are far more likely to engage in and prolong conflict. To talk terrorism for a moment, as that has come up, NY city residents, as a general rule, tend to be against US oversea actions, whereas people in rural states -- where the risk of so-called "blowback" is dramatically reduced -- are far more emboldened.
The world faces incredible peril if the people with their finger on the button, so to speak, can do so with any comfort that they themselves will ultimately be okay.