page reverts to index.php template instead of assigned

Hi,
I am trying to display posts of only certain category on a page, for which I have made a template and assigned it to that page from the page template selector.
However the page simply uses index.php instead.

This page is assigned as the default posts page.

If I try to insert a conditional in the index page to identify the page and display only one category for that page, it does not work either.
The code is as below:

<?php  if (is_page('18'))
{query_posts('cat=3');} ?>
<?php if (have_posts()) : while (have_posts()) : the_post(); ?>
<div class="post" id="post-<?php the_ID(); ?>">
<h3><?php the_title(); ?></h3>
<div class="entry">
<?php the_content('<p class="serif">Read the rest of this page &raquo;
'); ?>
</div>
</div>
<?php endwhile; endif; ?>

This however works if I remove the conditional, (but on all pages, not just the one I want)

* Some part of the code lines on the right does not appear here – don’t know why…