The recent detente, anchored by South Korea's hosting of the Winter Olympic Games that began on Friday, came despite an acceleration in the North's weapons programmes previous year and pressure from Seoul's allies in Washington.
President Donald Trump and the North's leader Kim Jong Un have engaged in a series of personal insults.
Pence only stood for the US team, according to the Associated Press, though others seated near Pence stood and applauded for the Korean delegation.
Kim Yo Jong, 28, is the first member of the ruling Kim family bearing the bloodline of the sacred Mount Paektu, a centrepiece of the North's idolisation and propaganda campaign, to cross the border into the South since the 1950-53 Korean War.
"Its delegation and athletes are getting all the spotlight, and Kim Jong Un's sister is showing elegant smiles before the South Korean public and the world". They also made plans to attend a concert together on Sunday, to see a North Korean orchestra perform in Seoul.
Kim Yo Jong told Moon that relations would improve quickly once he meets with her brother.
South Korean participants included senior officials Jeong Eui-yong, Jo Myong-gyoon and Im Jong-suk, the chief presidential secretary.
Mr. Pence's team said his presence in the box seats of host country South Korea sent a message of unity with the vice president, Japanese President Shinzo Abe and South Korean President Moon Jae-in sitting together in the front row.
Such a meeting, if it came about, would mark the first inter-Korea summit since 2007.More news: Former United footballer Liam Miller loses battle with cancer
U.S. Vice President Mike Pence, who attended Friday's opening ceremony along with the North Koreans, said "no daylight" existed between the United States, South Korea and Japan on the need to isolate North Korea.
At a Friday VIP reception for delegation leaders, Pence arrived late and stayed for just five minutes - and did not interact with the delegation from the North.
Pence's staff insists that the vice president would have met with the North Korean officials if the North Korean officials were interested in meeting.
Short track is one of the most popular sports in South Korea and as a series of home skaters reached the later rounds of the men's 1,500 meters and the women's 500, the North Koreans celebrated by waving flags in support.
"We have no intention to meet the USA side during our visit to South Korea", Jo said in a terse statement reported by state-run news agency KCNA.
South Korea's Kim Yuna thought she had seen and done it all during her stellar figure skating career, but lighting the Olympic cauldron as the final torchbearer of the Pyeongchang Winter Olympics took her breath away.
Analysts say the North's Olympic diplomatic drive seeks to loosen global sanctions against it and undermine the alliance between Seoul and Washington.
The U.N. says Secretary-General Antonio Guterres had a brief exchange with North Korea's nominal head of state and "reiterated his expectation and hope that all parties will use dialogue to achieve the denuclearization of the Korean Peninsula".
"What can not be overlooked is that Moon did not directly demand North Korea to abandon its nuclear development ..."