Custom template page navigation

Hi

I’m having problem with page navigation on my custom blog page template. I used query_posts to limit the loop to 5 posts and next_posts_link and previous_posts_link to navigate between pages. The navigation links led me to a new page, seen from the url/page/2/, but the page shows the same list of posts as the first page.

I have tried few methods I found on the net including using wp_query_reset but to no avail.

FYI, I also used query_posts on another page home.php to show only the latest 3 posts without page navigation.

Please help. Thanks.

Below is my page template


<?php get_header(); ?>

<div id="main-content">
<?php $paged = (get_query_var('paged')) ? get_query_var('paged') : 1; ?>
<?php query_posts("posts_per_page=5", "paged={$paged}") ?>

<div id="featured_posts">
<?php if (have_posts()) : global $more; $more = 0; while (have_posts()) : the_post(); ?>

<div class="entry">
<div <?php post_class() ?> id="featured-posts-<?php the_ID(); ?>">

<div class="entry_title"><h2>"><?php the_title(); ?></h2></div>

<div class="entry_head">
<span class="date"><?php echo get_the_date('');?></span>
<span class="category"><?php the_category(', ') ?></span>
<span class="comments"><?php comments_popup_link('No Comments »', '1 Comment »', '% Comments »'); ?></span>
</div>

<div class="entry_featuredimg img_shadow"><?php the_post_thumbnail(); ?></div>

<div class="entry_content">

<div class="entry_text"><?php the_content('<class="more">more...</span>', FALSE, ''); ?></div>

</div>

</div>
</div>

<?php endwhile; ?>

<?php include (TEMPLATEPATH . '/inc/nav.php' ); ?>

<?php wp_reset_query(); ?>

<?php else : ?>

<h2>Not Found</h2>

<?php endif; ?>

</div>

</div> <!-- END #main-content -->

<?php get_sidebar(); ?>

<?php get_footer(); ?>