Let us state clearly as to what exactly is your requirement.
You want your blog to appear as if it is in a sub-directory of your main domain. EG: http://yourdomain.com/blog/ - but the WordPress files are in your root directory only.
In this process, there are 2 alternatives:
1. Your blog will appear in "/blog/" but the posts and pages will have the URL as if they are from the root only. Viz: http://yourdomain.com/2009/07/your-blog-post/.
If you are satisfied with this scenerio, there are very easy steps:
a) Create 2 pages - Home and Blog - both set to default template. Write whatever you want to appear on your front page, in the page named "Home". Write nothing in the page named "Blog". Publish.both pages.
b) In "settings -> Reading", select Front page displays => A static page (select below) option, and select FrontPage => Home and Post Page => Blog.
You are done.
2. But if you want your blog posts to have URLs like "http://yourdomain/blog/2009/07/your-blog-post/", then you can follow the instructions contained in the Codex page cited by you earlier in this thread.
But one step is omitted in the Codex page. That is item (b) above. You have to do that too.
I tested it. It is working.
HTH. Give a holler if stuck.