No matter how many posts appear in a blog-in-blog page, the pagination at the bottom shows that there are 86 pages of entries.
So, for example, if there's only 1 entry being brought in with blog-in-blog, at the bottom of the page it will say "Page 1, 2, 3 ... 86"
If I click on any number other than one, I get the page with "Blog in Blog: There are no posts that match the selection criteria."
If I have 4 entries (programmed to show 3 per page), then the first page will have 3, the second will have 1. But the numbers at the bottom still go up to 86, and clicking on any number higher than 2 brings up what I just described.
I do use WP-PageNavi, but deactivating it made no difference.