* Bill Clinton arrives in LA with two journalists
* Clinton, Kim Jong-il held "exhaustive conversation"
* Hillary Clinton insists there's no link to nuclear talks (Updates with Obama, his spokesman's statements)
By Steve Gorman and Dan Whitcomb
LOS ANGELES, Aug 5 (Reuters) - Two American journalists freed by North Korea after months of detention returned home to a tearful family reunion on Wednesday accompanied by former President Bill Clinton, who secured their release in a meeting with reclusive leader Kim Jong-il.
Despite the mission's success, the drama underlined the fine line Washington treads to avoid rewarding the hermit state for repeated military provocations while trying to coax it into giving up its ambitions of becoming a nuclear-weapons power.
President Barack Obama's spokesman said North Korea must comply with its international obligations for ties with Washington to improve. Asked whether relations had changed as a result of the release, spokesman Robert Gibbs said: "We view this as different events."
Laura Ling, 32, and Euna Lee, 36, reporters for an American cable television venture co-founded by Clinton's former vice president, Al Gore, arrived with Clinton at Burbank airport near Los Angeles aboard a private jet from North Korea.
The two Current TV journalists were arrested on March 17 for illegally crossing into the North from China and had been reporting on the trafficking of women. They were both sentenced to 12 years of hard labor in June.
Ling raised her arms in the air in a sign of victory as she and her colleague descended from the plane to an emotional reunion with their families inside an airport hangar.
Ling said she and Lee both feared they could be taken at any moment to a hard labor camp when on Tuesday they were led instead to a location where Clinton was waiting for them.
"We knew instantly in our hearts that the nightmare of our lives was finally coming to an end. Now we stand here home and free," she told reporters.
Clinton was received with a round of applause and an embrace from Gore, who said President Barack Obama and "countless members of his administration have been deeply involved" in securing the journalists' release.
Clinton did not speak on arrival, but in a statement he said the women's families, Gore and the White House had asked him to undertake the humanitarian mission to Pyongyang.
Clinton, who unsuccessfully tried to halt North Korea's nuclear arms program in the 1990s, spoke on Wednesday with Obama and was expected to brief national security officials on his rare meeting with Kim and other Pyongyang officials.
Obama said he was "extraordinarily relieved" at the return of the journalists and thanked Clinton.
SPECIAL PARDON
North Korea's KCNA news agency said Kim issued a special pardon to the journalists enabling them to leave. It also reported that Clinton and Kim agreed their two countries should settle "pending issues" between them through dialogue.
The Obama administration insisted it had not offered any sweeteners to North Korea in its nuclear standoff with the West in return for its release of the journalists.
But a senior U.S. official said on Tuesday that Clinton did talk to North Korea's leadership about the "positive things that could flow" from freeing the two women.
Clinton's visit marked the first high-level U.S. contact with North Korea since he was president nearly a decade ago. Obama aides, however, brushed aside suggestions that it had opened a new diplomatic channel to Pyongyang.
"We made clear in every communication we had with the North Koreans, and President Clinton made clear in all his conversations, that this was a purely private humanitarian mission," the U.S. official told reporters after the pardons were granted on Tuesday.
Clinton's wife, U.S. Secretary of State Hillary Clinton, also insisted in Nairobi that there was no connection between efforts to free the journalists and the thorny nuclear issue.
"We have always considered that a totally separate issue from our efforts to re-engage the North Koreans and have them return to the six-party talks and work for a commitment for the full, verifiable denuclearization of the Korean peninsula," she said.
In North Korean media photos, Kim was smiling and looked in reasonable health after speculation he was seriously ill. Kim was suspected of suffering a stroke last year.
Some analysts speculated that Clinton's discussions with Kim could open the way to direct nuclear disarmament talks, but warned the visit might be seen as a reward for North Korea despite repeated military acts and its defiance of U.N. sanctions imposed over its May 25 nuclear test.
Pyongyang, craving the recognition that direct negotiations with the Obama administration would bring, painted the meeting between Clinton and Kim as high-level talks which the North Korean leader will certainly use to boost his image at home.
Financial markets in Tokyo and Seoul largely ignored the visit, though some South Korean traders said it added a more positive atmosphere to what has been a string of negative reports over the North in recent months.
Japan welcomed the journalists' release and a foreign ministry official said it was a sign that North Korea was "yearning for dialogue with the United States," Kyodo news agency reported.
The same Japanese official said Tokyo would step up its cooperation with the United States to bring North Korea back to the six-party denuclearization talks. (Additional reporting by Steve Gorman in California, Jack Kim in Seoul, Lucy Hornby in Beijing, Chisa Fujioka in Tokyo, Sue Pleming in Nairobi; and Ross Colvin, Matt Spetalnick and Paul Eckert in Washington, Writing by Anthony Boadle, Editing by Howard Goller)