previous_post_link not working

The website: http://providencedailydose.com
I have two loops on the main the first use wp_query to display one post from a certain category and main loop uses query_post to display the rest of the post excluding the category from the first loop.

loop 1:

<?php
  $page = (get_query_var('paged')) ? get_query_var('paged') : 1;
  ?>
  <?php if (have_posts()) : ?>
  <?php //query_posts('paged='.$paged);
$temp = $wp_query;
$wp_query= null;
   $wp_query = new WP_Query();
   $wp_query->query('category_name=featured&showposts=1'.'&paged='.$paged);
?>
  <?php while (have_posts()) : the_post(); ?>
  <div id="feature">
    <div id="feature-ad"><img src="<?php bloginfo('template_directory');?>/images/728x90_ad.png" alt="728x90 banner ad" width="728" height="90" name="728x90" /></div>
    <div class="post" id="post-<?php the_ID(); ?>">
      <p class="cats">
        <?php $category = get_the_category(); ?>
        filed under: <a href="/topics/<?php echo $category[0]->category_nicename; ?>/" name="<?php echo $category[0]->cat_name; ?>"><?php echo $category[0]->cat_name; ?></a> | <a href="/topics/<?php echo $category[1]->category_nicename; ?>/" name="<?php echo $category[1]->cat_name; ?>"><?php echo $category[1]->cat_name; ?></a></p>
      <h2><a href="<?php the_permalink() ?>" rel="bookmark" title="Permanent Link to <?php the_title_attribute(); ?>">
        <?php the_title(); ?>
        </a></h2>
      <p class="date-stamp">
        <?php the_time('gA') ?>
        ON
        <?php the_time ('d/m/Y') ?>
        <br />
        BY
        <?php the_author_posts_link(); ?>
      </p>
      <div class="entry">
        <?php the_content('<span class="more-link">more &raquo;</span>'); ?>
      </div>
      <p class="postmetadata">
        <?php edit_post_link('Edit', '', ' | '); ?>
        <?php comments_popup_link('leave a comment on this post »', 'one comment »', '% comments »'); ?>
      </p>
    </div>
  </div>
  <?php endwhile; ?>
  <?php endif; ?>
  <?php $wp_query = null; $wp_query = $temp;?>

loop 2:

<?php if (have_posts()) : ?>
    <?php query_posts('cat=-2032'); ?>
    <?php while (have_posts()) : the_post(); ?>
    <div class="post" id="post-<?php the_ID(); ?>">
      <p class="cats">
        <?php $category = get_the_category(); ?>
        filed under: <a href="/topics/<?php echo $category[0]->category_nicename; ?>/" name="<?php echo $category[0]->cat_name; ?>"><?php echo $category[0]->cat_name; ?></a> | <a href="/topics/<?php echo $category[1]->category_nicename; ?>/" name="<?php echo $category[1]->cat_name; ?>"><?php echo $category[1]->cat_name; ?></a></p>
      <h2><a href="<?php the_permalink() ?>" rel="bookmark" title="Permanent Link to <?php the_title_attribute(); ?>">
        <?php the_title(); ?>
        </a></h2>
      <p class="date-stamp">
        <?php the_time('gA') ?>
        ON
        <?php the_time ('d/m/Y') ?>
        <br />
        BY
        <?php the_author_posts_link(); ?>
      </p>
      <div class="entry">
        <?php the_content('<span class="more-link">more &raquo;</span>'); ?>
      </div>
      <p class="postmetadata">
        <?php edit_post_link('Edit', '', ' | '); ?>
        <?php comments_popup_link('leave a comment on this post »', 'one comment »', '% comments »'); ?>
      </p>
      <hr  />
    </div>
    <?php endwhile; ?>
    <div class="navigation">
      <div class="alignleft">
        <?php next_posts_link('&laquo; Older Entries') ?>
      </div>
      <div class="alignright">
        <?php previous_posts_link('Newer Entries &raquo;') ?>
      </div>
    </div>
    <?php else : ?>
    <h2 class="center">Not Found</h2>
    <p class="center">Sorry, but you are looking for something that isn't here.</p>
    <?php include (TEMPLATEPATH . "/searchform.php"); ?>
    <?php endif; ?>

the previous_posts_link shows up but just displays the same posts as on the home page.