1: I am going to say, yes. The June Democracy Movement was in full swing around this time, don't forget, and the ROK's hosting of the 1988 Olympics is still set for this timeline. Of course, whether it actually happens is another question...
en.wikipedia.org
Neither Doo-hwan nor Tae-woo wanted violence to spill out on the streets with the democracy protests, particularly with everyone's eyes on the ROK in the lead up to the 1988 Olympics, it would have looked pretty bad to put it mildly, and the North Koreans would have a field day with the potential propaganda.
2: Tae-Woo still likely wins, but he has to face a serious balancing act now. On the one hand, he knows he needs to make the Democracy movement happy. On the other hand? Well, as it turns out, the Soviets know the Americans have significant forces in the ROK, Japan and the Philippines to deter the Norks (my favorite nickname for them, blame Curtislemay) and the Soviet's Pacific forces. A good way obviously to keep the Americans from shifting forces to Europe from the Pacific is to force the Americans to keep focused on the Pacific as well. So, what do the Soviets do...?
They begin, as mentioned in the "Night on the Town" chapter by launching the coup in Indonesia and potentially driving a wedge in the Pacific sea lanes between the Philippines and Australia and New Zealand, U.S. allies. And of course Indonesia has sights on Papua New Guineau (an Australia ally), and can provide numerous ports, coves, airbases etc. to rest, arm and refit the Soviet Pacific Navy and Air Forces, and potentially push out from Cam Ranh Bay in Vietnam. Suffice to say, Australia and New Zealand are upset to put it mildly and have reformed the ANZACs who are receiving tons of new equipment from the US and elsewhere (Austria and Italy, among them). But that's not enough...
The Soviets also begin making overtures to the Kims, and by Kims I don't mean just Kim Il-Sung and his batshit insane kids, the whole Kim "dynasty" runs North Korea. Kim Il-Sung notices the KPA's army as far as it's equipment goes is starting to get long in the tooth, while the US is working overtime to get both the US and ROK forces modernized ASAP. China wants to keep using the Norks to keep the Americans far from the Yalu river, but at the same time Deng Xiaoping is in charge whos more of a ruthless pragmatist and wants to keep the potential profit windfalls from trade between the US and China around this time going. In short, the Soviets make practical overtures in terms of new equipment to the Norks: Export T-72 tanks, new model export MI-24 Hind gunships, Mig-23 Flogger jets, SCUD launchers, artillery, etc. The Chinese are not at all happy about this, but what can they do? The Soviets can also provide oil to the Norks as well.
So what does this mean for Tae-Woo? Possibly the "June 29 Declaration" will either be more nuanced, or doesn't get declared at all. He has to make some overture to the Democracy movement though, to keep them placated, but has to rally around the ROK populace against what his generals are advising him is now likely a very real threat and not just posturing from the Norks. Not to mention the Norks have been up to all sorts of tomfoolery and were quite active in the 80's, not just with border incidents but all kinds of lunacy, the bombing of Korean Air Lines 858 in November 1987 in particular.
en.wikipedia.org
Needless to say, Korean Air Lines must have felt cursed considering the shootdown of KLA007 in 1983.
en.wikipedia.org
3. Don't give me ideas about Pinochet....that might actually happen. Especially now in this timeline with the Soviets looking, or rather trying to sweeten relations with the Bolivians, in spite of some stumbling blocks.
Bolivia and Chile have had rather spotty relations, thanks in no small part to the Atacama border dispute. If things were to head south (no pun intended) in 1988 and the US is stretched thin attempting to fight wars and crises on multiple fronts, someone might be tempted to settle the "Atacama question", no?