MichaelH, at least for me that setup does not work. I am using the current svn version from today (which is between 2.3 and 2.5). I have everything configured as you suggested, i.e. my wp files are in /blog/ so 'siteurl' is <someurl>/blog and 'home' is <someurl>. In my opinion that 'moves' both, posts and pages, to <someurl>/permalink, right?
But what I (and presumably also the OP) want to achieve is that blog posts are available (and permalinked) at <someurl>/blog/2008/02/post-slug while pages get URLs like <someurl>/page-slug
Btw. when I try to access a post with /blog/ manually prepended to its URL I am getting a 404.