SEOUL (Reuters) - Hermit North Korea had no problems letting a visiting orchestra play the national anthem of its mortal enemy the United States, but to allow its people to hear the one from its other half, South Korea, at a football match is a step too far.

Analysts say the communist state, which considers the Korean peninsula a single nation whose southern half is temporarily adrift, is likely to call off hosting a March 26 World Cup qualifying match rather than accede to its neighbour's demand to raise its own flag and play its anthem.

"North Korea will never let something that goes against its 'one-Korea' principle to happen in Pyongyang, the heart of the country," said Yang Moo-jin, an expert on the North at the South's Institute for Far Eastern Studies at Kyungnam University.

The governments of the two Koreas have yet to sign a peace treaty to end their 1950-1953 war and each claims to be the rightful ruler of the entire peninsula.

In recent years, pragmatism has increasingly played a role in relations, not least because the North depends on its wealthy neighbour for aid, and they have staged joint sporting events.

Yang said North Korea allowed the New York Philharmonic to play the U.S. national anthem at an unprecedented concert in Pyongyang last week because it sees its ties with the United States as being state-to-state.

By contrast, the South Korean government is an impediment to its rule over the whole of Korea.

North Korea has proposed instead playing a folk song treasured on both sides of the border and flying a joint flag used when they marched together at the Olympic Games.

South Korean officials have called this unacceptable and appealed to football's governing body FIFA to force North Korea to bend to its demands. Seoul has in the past allowed the North to fly its flag and play its anthem when playing in the South.

South Korean media is speculating the World Cup 2010 qualifier will end up being played in China.

GROUP BUSTER

It is the first time the two have been drawn to play in the same early qualifying group for the World Cup, where sides play home and away matches.

Displaying the South's flag and anthem in front of tens of thousands at a stadium in Pyongyang for a match likely broadcast on the North's official TV is too much for the its propaganda apparatus to bear, said Brian Myers, a specialist on the North's official culture at the South's Dongseo University.

Myers said North Korea's propaganda has had to adjust its message over the past several years and admit to its people that its rival to the South is the richer state.

The impoverished state compensates by saying the people of the South view the North's leader Kim Jong-il with deep respect and as the protector of the true Korean culture.

"The more the North Korean people find out about the higher living standard and the people, the more necessary it becomes for the propaganda apparatus to hammer home this point about the South Korean's love and respect for Kim Jong-il," he said.

"Their propaganda cannot handle the image of South Koreans appearing proud of the own national team, waving their own national flag in Pyongyang," he said.

(Additional reporting by Lee Jiyeon; Editing by Jonathan Thatcher and Jeremy Laurence)