How to get the blog path to show correctly for posts and also post page not found when selected?

Hey:

A bit strange...

I have settings>reading>Blog (a page call blog loaded) selected for Posts Page. However, when I do this the /blog is No Results Found. That is the first thing. If I remove, however, Post Page totally from the settings>reading>"select" the posts are shown though...strange.

Second: the path for posts should be mysite.com/blog/test_post etc, but it is showing up as mysite.com/test_post etc. instead. How can that be fixed?

Thanks...