The Garda and Defence Forces are expected to reappraise Border security in the light of the use of an under-car bomb by loyalists to kill Ms Nelson.
There is concern that the loyalists may move on from the assassination of their most high-profile target since the calling of the 1994 cease-fires to an attack in the Republic.
The concerns in the Republic also stem from an anticipation that hard-line republicans in north Co Armagh might decide to attack a loyalist or Protestant target in retaliation for Ms Nelson's murder.
According to security sources, the killing of Ms Nelson was a major development on the part of the loyalists, who had previously confined their attacks to isolated Catholic families, bars and churches.
The killing shows that the dissident loyalist elements are being helped and supplied by members of the mainline loyalist groups whose leaderships have otherwise adhered to the ceasefire.
The RUC Chief Constable, Sir Ronnie Flanagan, yesterday pointed out that the group which had claimed the killing, calling itself the Red Hand Defenders (RHD), had not previously shown any signs of having reached any significant degree of sophistication in its attacks.
Sir Ronnie said he believed the group had either "hired in expertise" or was being assisted by members from other loyalist groups.
According to security sources the same type of under-car bomb used to kill Ms Nelson was also used by figures in the Ulster Defence Association (UDA) to kill another loyalist figure, Glen Greer, in Bangor, Co Down, in June 1997. Mr Greer was involved in a feud with other loyalists at the time.
It is believed Ms Nelson was chosen as a target because she had developed such a high public profile in supporting the Garvaghy Road residents and in defence of republicans in the mid-Ulster area.
She also appears to have had little personal security despite the fact that she had received repeated death threats.
Ms Nelson was highly regarded by republicans, and there are a number of figures in the north Co Armagh area who have previously disrupted the peace process in the North by carrying out attacks at sensitive points in the negotiations.
Security figures believe if these republicans attack a loyalist figure this will provide the loyalists with the excuse for further attacks, possibly in the Republic.