CMS themes - need help with pagination please!

Hi guys,
I'm tearing my hair out and would appreciate some help. I'm using Dixi and Nelo to provide CMS based websites. I've got it setup to automatically create all the pages including a news page that calls a news page template.

All works great EXCEPT the pagination is not working on the news page. I've spent two days on this and I know it's a really simple fix...just don't know what it is!

I'm using the following code to call the posts.
<?php if (have_posts()) : ?>

<?php $page = (get_query_var('paged')) ? get_query_var('paged') : 1; query_posts("paged=$page"); ?>

<?php while ( have_posts() ) : the_post() ?>

Posts are displaying fine on this page but just not paginating. Paginaton is fine on the archives etc so its not a theme-wide issue. i've obviously messed up somewhere. Any ideas?