I used the 2.1.2 menu option to assign a front page for my blog and I assigned the blog page to "blog" which uses the page template "blog.php". This worked just fine with my existing permalink structure: /%page_id%/. My problem occurred when I updated my permalink structure to: /blog/%page_id%/. Initially everything appeared to work, until I attempted to display a single post by selected it from the "blog" page. No matter what post I selected, the last page of the last post always displayed.
I tried inputing the post URL directly into the browser address bar and still, page 6 of post#17 displayed. What's interesting is that if I enter a post URL plus a page number into the address bar, then the correct post displays, even when that post has only one page, eg: "www.mysite.com/blog/14/1/" displays the correct post but "www.mysite.com/blog/14/" displays page 6 of post #17.
I switched back to the old permalinks structure, but I thought I should report this wacky problem.