Page Navigation Problem

Hello, I am using the Prestige Theme and made all the changes I need as said on other topics (if necessary) but I can’t make my homepage go to previous or next pages of posts. The url changes to page/2/ but the navigation says it is page 1 and the posts are from page 1.

I think this piece of code is important:

// prepeare posts query
            $paged = (get_query_var('paged')) ? get_query_var('paged') : 1;
            $args=array('paged'=>$paged);

            if($blog_categories != '') { $args['cat'] = $blog_categories; }
            if($blog_authors_arg != '') { $args['author'] = $blog_authors_arg; }
            if($excluded != '') { $args['category__not_in'] = $excluded; }

            query_posts($args);
            $max_page = $wp_query->max_num_pages;

What changes do I need to make?

Does the permalink structure affects it? I am using /%category%/%postname%/

Does the fact that I am using the a page as blog home page affects the navigation? mysite.com/home (page) -> mysite.com

Using the theme twentyten it works well.

The wp-pagenavi plugin also doesn’t work with the same problem.