I've looked through several forum posts about the static front page sub panel, but can't find an answer to my question. Basically -- I can get the functionality to work, but only by editing index.php once all is said and done. That seems wrong to me (though perhaps it's not).
How I'm doing it:
I've created two templates ('site-home.php' and 'blog.php'), both of which contain loops, and I've published a page based off each template ('home' and 'blog'). I assigned the 'home' page as my static front page. Works great. I then assigned the 'blog' page (based off blog.php) as my posts page. A list of my latest posts is generated, as expected, but editing the 'blog.php' template changes nothing on the page. Editing index.php does.
Is that how it's supposed to work? Seems to me the system isn't reading my 'blog' page properly and is defaulting to index.php (as, apparently, WP is designed to do).