Paged navigation

I downloaded the zip-file, uploaded the php-file to my plugin-directory, activated it, and everything looked like it would work. But.. Here is my maybe stupid question: What am I going to write in my index.php to get the paged navigation to show up? And where?
I tried writing <?php page_navigation() ?> both inside and outside the “loop”, but nothing happens.. Not even an error message..

Yes, I am using WP1.2..
This is the code I have on the index.php:
<?php foreach ($posts as $post) { start_wp(); ?>
<?php the_date(“d/m-y”,”<h2>”,”</h2>”); ?>
<h3 class=”storytitle” id=”post-<?php the_ID(); ?>”>” rel=”bookmark” title=”<?php the_title(); ?>”><?php the_title(); ?></h3>
<?php the_content(); ?><?php link_pages(“
Pages: “,”
“,”number”) ?>
Skrevet af <?php the_author() ?> @ “><?php the_time() ?> <?php edit_post_link(__(“Redigér”), ‘ |’); ?>
<?php comments_popup_link(__(‘Skriv en kommentar’), __(‘1 kommentar’), __(‘% kommentarer’)); ?>
 
<?php include (“wordpress/wp-comments.php”); ?>
<?php } ?>
<?php page_navigation() ?>
A friend of mine, also tested it on his site – and it doesn’t work there either..
But, thanks for your help, so far.