This and a few other block themes act the same way. The Home Page template will be the homepage, no ifs and of buts about it. Here’s how I deal with it.
Use Home Page template as your home page. Create a page called Blog/Posts or whatever you like. It doesn’t need any content. Go to Settings > Reading and set that Blog page to that but leave the Home page choice empty.
The homepage will use the Home Page Template and Posts page will use the Index Template so if you want to change the look of the Blog page, change Index Template.
The Page Template will affect all pages except for Blog/Posts.
Archive Template affects every other type of archive like Tags, Categories, Author. That is unless or until you make custom templates for those.
The rest of the templates are straight forward. Single Post displays single posts, 404, search do what you’d think.
Hint; See the description under each template name on this page, wp-admin/site-editor.php?postType=wp_template
They tell you exactly what they do. Took me a while to things figure out.
