Query Posts and Navigation

I have a separate blog template (blog.php) to show posts in my blog and a static home page (home.php) that seems to be working. However, as I was testing the paging of multiple posts, I noticed that the navigation links within The Loop do not show up properly when I reduce the number of posts shown on a page.

Here is how I am setting up The Loop on blog.php

<?php $blog_query = new WP_Query('posts_per_page=1'); ?>
<?php if ($blog_query->have_posts()) : ?>

<?php while ($blog_query->have_posts()) : $blog_query->the_post(); ?>

After the endwhile I have the following to setup the navigation links to the next page:

<div class="navigation">
<div class="alignleft"><?php next_posts_link('&laquo; Older Entries') ?></div>
<div class="alignright"><?php previous_posts_link('Newer Entries &raquo;') ?></div>
</div>

When I view my blog page, I see a single post, but the navigation links do not show up. All that is there are empty div tags.

I have also tried to replace the instantiation of WP_query class with a query_posts() call, but when I do that the blog.php page stops rendering at the point of the call to query_posts().

How can I display the navigation links?

Thanks.