Version 3.1.2 bug(?): is_paged(), index.php, and multiple loops

Hey everyone. I’m not sure if what I’m experiencing is a result of a bug (due to the recent upgrade to 3.1.2) or poor coding. Ever since i upgraded to version 3.1.2 ive been experiencing a problem with two loops on my index page.

Here’s what I’ve got for my index page

<?php
			if ( ! is_paged() && is_front_page() ) {
				echo '<h6 class="sec1 title">FEATURE</h6>';
				$sticky = get_option( 'sticky_posts' );
				if ( isset( $sticky[0] ) ) {
					$args = array(
						'posts_per_page' => 3,
						'post__in'  => $sticky,
						'ignore_sticky_posts' => 1);
					// Query
					$featured_query = new WP_query( $args );
					while ($featured_query->have_posts() ) :
					$featured_query->the_post();
						$featured[] = $post->ID;

					get_template_part( 'content', 'featured' );

					endwhile;
				} // endif sticky
			} // endif is_paged
			?>

			<?php
				$sticky = get_option( 'sticky_posts' );
				echo '<h6 class="sec1 title">LATEST ARTICLES</h6>';
				$paged = get_query_var( 'paged' ) ? get_query_var( 'paged' ) : 1;
				$query_args = array(
					'posts_per_page' => 10,
					'paged' => $paged,
					'post__not_in' => $featured,
					'post__not_in' => $sticky
					);

				query_posts($query_args);
				if (have_posts() ) :
				while (have_posts() ) :
				the_post();

				get_template_part( 'content', get_post_format() );
			?>

			<!--<?php trackback_rdf(); ?>-->

			<?php endwhile; else: ?>

			<div class="box">
				<p>
					<?php _e( 'Sorry, no posts matched your criteria.' ); ?>
				</p>
			</div>

			<?php endif; ?>

// Navigation comes over here

Say for example the first loop (sticky posts) yields 3 posts, and the second loop (all other posts) yields 10 posts. The problem I’m experiencing is that when i move to the next page, the last 3 posts from page 1 get repeated at the the top of page 2.

So this is what i tried, i removed the ( ! is_paged() && is_front_page ) condition along with the entire first loop, and the problem got resolved.

What am i doing wrong?