Loop: pagination doesn't work

This is your problem.

query_posts( 'cat=1&posts_per_page=2' );

More info:
http://codex.ww.wp.xz.cn/Function_Reference/query_posts#Pagination

Because you’re not doing a query_posts there?

The query_posts() function changes the main query for the page. When you use it, you override the “automatic” main query which takes everything into account normally, and tell it that you want to do something other than the default.

Really, you should use the pre_get_posts filter instead of the query_posts() function. Then you can modify the main query instead of overriding it entirely.