I wouldn't overestimate their knowledge. Just as Saddam Hussein thought he'd be allowed to annex Kuwait and generally behave like an ass and nobody would dare to lift a finger, Kim is probably under the same impression. People think that various totalitarian regimes feed their citizens propaganda, but deep inside the inner party circle they have rational (even if evil) people that operate on correct information and capable of making correct (even if extremely self-serving) decisions.

The reality is usually different. The inner circle may have access to more information, but they are also largely ignorant about how politics works in the Western countries. They are as prone to biases and misjudgment as any human, and the absence of robust feedback circles usually present in open society amplifies their errors of judgement. And of course, somebody can only be told he is a unerring genius and supreme being for so long before he himself starts believing it, and once that happens, huge errors of judgment are inevitable.

Thus, what they expect the West to do may be completely different from what the West would actually do.