Can't apply wp_reset_query() in index.php

Hello everyone!
I just almost finished building my own first WordPress theme. As a starting point I used Chris Coyier’s Blank theme. But now there is one problem: when I klick on the “Older Entries” link, page 2 is opening, but i see the same list of post that showed up on the first page. I found some tip that I need to use wp_reset_query() after the query_posts() loop. So I inserted this function in my index.php, but no sign of any differences.
My index.php:

[code moderated as per forum rules - please use the pastebin]

Thanks in advance for any help!