Washington has asked Seoul to send combat troops to support the stretched US military presence in Iraq.
"Prior to making any decision on the troop dispatch it is extremely important to arrive at a positive outlook for, and conviction in, peace and stability on the Korean peninsula," said President Roh Moo-Hyun on Wednesday, in a speech to mark armed forces day in the capital.
South Korean media reports have said Washington has asked for 5000 combat troops, but the figure has not been confirmed.
The request has triggered protests from South Koreans who are opposed to the US invasion of Iraq and fault the US hardline on North Korea over the nuclear crisis.
Speaking to a gathering of dignitaries and military top brass at a ceremony marking the founding of the South Korean military 55 years ago, Roh called on North Korea to scrap its nuclear weapons drive and said the resolution of the dispute was his top policy goal.
The United States, Japan and South Korea hope to persuade North Korea to hold another round of six-way talks on its nuclear arms programme in November, US officials have said.
South's President Roh Moo-Hyun
wants to beef up his military
But North Korea’s deputy foreign minister told the UN General Assembly on Tuesday his country was losing interest in the negotiations because of Washington’s attitude, saying both sides should disarm simultaneously.
Washington wants North Korea to agree to a verifiable end to its nuclear programme, while Pyongyang wants a firm assurance the US will not attack.
Seoul is seeing its first military parade in five years. But despite the display of military pomp and firepower, South Korea still relies on outside help to defend itself, Roh said. He said his 10-year goal was to develop a fully independent defensive capability appropriate for the world's 12 biggest economy.
Roh said defence spending was set to rise by 8.1% next year, compared with a 2.1% increase for the overall budget, but the amount was still insufficient. More would be invested as the economy improved, he said, and the country should become self-reliant in defence within 10 years.
The United States, under a 50-year-old mutual defence treaty, stations 37,000 troops in South Korea, and carries out key military functions.
Those roles will gradually be handed over to South Korean forces under a realignment plan being discussed by both sides that will see US troops pulled back from the frontier with North Korea over the next several years.