Comments Won’t Paginate

I have the setting in Settings > Discussion to paginate comments. Allow 10 per page then break into a new page. But this is having no effect on the blog.

Here is the single.php code around the comments part:
<?php comments_template(); ?>

Also, here is comments.php just in case it is needed:

<?php // Do not delete these lines
	if (!empty($_SERVER['SCRIPT_FILENAME']) && 'comments.php' == basename($_SERVER['SCRIPT_FILENAME']))
		die ('Please do not load this page directly. Thanks!');

	if (!empty($post->post_password)) { // if there's a password
		if ($_COOKIE['wp-postpass_' . COOKIEHASH] != $post->post_password) {  // and it doesn't match the cookie
			?>

			<p>This post is password protected. Enter the password to view comments.</p>

			<?php
			return;
		}
	}

	/* This variable is for alternating comment background */
	$oddcomment = 'alt';
?>
<?php if ( $comments ) : ?>
<!-- You can start editing here. -->

            <?php $urlHome = get_bloginfo('template_directory'); ?>

			<div class="box post-comments" id="comments">
				<div class="content">
					<h2><?php comments_number('No Responses', 'One Response', '% Responses' );?></h2>

                    <?php foreach ($comments as $comment) : ?>
                     <div id="comment-<?php comment_ID() ?>" class="fl ar">
                     	<div class="pic"><?php echo get_avatar( $comment, 80, $default = $urlHome . '/images/default_avatar_visitor.gif' ); ?></div>
                     	<div class="comm-name"><a href="<?php comment_author_url(); ?>" target="_blank"><?php comment_author(); ?></a></div>
                     	<div class="comm-date"><small><em><?php the_time('m.d.y') ?></em></small></div>
                     </div>
                     <div class="fr">
                       <div class="box2 <?php echo $oddcomment; ?>">
					     <?php comment_text() ?>
                       </div><!--/box2 -->
                     </div>
                     <div class="fix"></div>
                    <?php $oddcomment = ( empty( $oddcomment ) ) ? 'alt' : ''; ?>
					<?php endforeach; // end for each comment ?>

				</div><!--/content -->
			</div><!--/box -->
<?php endif; ?>

			<?php if ('open' == $post->comment_status) : ?>
			<div id="respond" class="box post-comments">
				<div class="content">
					<h2>Leave Your Response</h2>

                    <?php if ( get_option('comment_registration') && !$user_ID ) : ?>
                    <p>You must be <a href="<?php echo get_option('siteurl'); ?>/wp-login.php?redirect_to=<?php echo urlencode(get_permalink()); ?>">logged in</a> to post a comment.</p>
                    <?php else : ?>

					<div class="fl">
						<div class="pic"><img src="<?php bloginfo('template_directory'); ?>/images/default_avatar_visitor.gif" alt="" /></div>
					</div>
					<div class="fr">
						<form action="<?php echo get_option('siteurl'); ?>/wp-comments-post.php" method="post" id="commentform">
							<fieldset class="message">
							<?php if ( $user_ID ) : ?>
                                <p>Logged in as <a href="<?php echo get_option('siteurl'); ?>/wp-admin/profile.php"><?php echo $user_identity; ?></a>. <a href="<?php echo get_option('siteurl'); ?>/wp-login.php?action=logout" title="Log out of this account">Log out &raquo;</a></p>
                            <?php else : ?>
							<div>
								<input name="author" id="author" type="text" value="Your Name" onclick="this.value='';" />
							</div>
							<div>
								<input name="email" id="email" type="text" value="Your Email" onclick="this.value='';" />
							</div>
							<div>
								<input name="url" id="url" type="text" value="Your Website" onclick="this.value='';" />
							</div>
                            <?php endif; ?>
							<div class="textarea">
								<textarea name="comment" id="comment" cols="" rows="">Your Comments</textarea>
							</div>
							<div class="submit">
								<input name="submit" id="submit" type="image" src="<?php bloginfo('template_directory'); ?>/images/btn-submit.gif" value="Send" class="btn"  />
							</div>
							<div class="notice">* Name, Email, Comment are Required</div>
                            <input type="hidden" name="comment_post_ID" value="<?php echo $id; ?>" />
							<?php do_action('comment_form', $post->ID); ?>
							</fieldset>
						</form>
                        <?php endif; // If registration required and not logged in ?>
					</div>
					<div class="fix"></div>
				</div>
				<!--/content -->
			</div>
			<!--/box -->
            <?php endif; // if you delete this the sky will fall on your head ?>

Would GREATLY appreciate any help in fixing this issue!