It depends how Korea is unified. If the North marches South then they'll be one hell of a bloody conflict. South Korea has more sophisticated weapons, better technology, a far better economy & has guaranteed protection from the USA.
North Korea has numbers on its side, fanatical devotion, years of preparation (bunkers & tunnels dug deep into hills/mountains) & it also has WMDs. NK would have to catch SK (and America) unprepared & use their full military might & WMDs to completely take the South. They'd also have to have at least implicit support from either Russia or China to keep them resupplied.
I can't see the North winning the war but through the use of WMDs & fanatical fighting I do think it'd be chaos. With the element of surprise, NK could surround Seoul but urban fighting is tough. They'd struggle to take it, especially if SK reserves are flooding into the battle & American forces are beginning to arrive.
Basically, if the North goes South, I expect the South to win & possibly push on to reunite the whole country; it'll be a bloodbath though, especially if NK uses WMDs on Seoul.
Another possibility is that North Korea falls apart due to internal factions all competing for power. It could turn into a civil war which then means SK acts in order to secure WMDs & possibly to reunite the Koreas with American backing.
The Chinese could prove decisive - from what I gather, they like North Korea as a buffer state to stop themselves being bordered by a nation friendly to the USA. Although they might not interfere in the same way Mao's forces did in the Korean War, I'd be surprised if they simply allowed South Korean (& possibly US troops) up to their border.
To summarise: it really does depend on how reunification is achieved. If it's by a bloody conflict with the use of WMDs then it'll take both the North and South years to recover.
Even if it's a less intense conflict then South Korea won't instantly be able to assimilate the North's population into its economy. I'd say that NK is in a worst state than East Germany was in 1989. It took time for the German economy to handle reunification but now it's a powerful economy. Given time a reunified Korea under the control of the democratic government in Seoul could become a bigger player. However, I do think that Korea would cut back on defence spending after this although perhaps not totally due to its proximity to China.