WordPress static home page gives 404 error when paginated

Hi all,

My problem is this:

I’ve set up a WordPress Blog for the first time.
I have a static page set as home page which is quite a long article and getting longer!

I’ve decided to break the article up into 2 or 3 separate pages. This is to make the article “sticky”. People tend to dislike long articles when they have to scroll, so they leave to find easier reading.

I’ve added the <!–nextpage–> tag (in html, not visual) and edited wp_link_pages in the template files.

All works well on the initial page, but when I forward to page 2 I get an “Error 404 – Not Found” message.

I have tried changing to 3 or 4 other themes, no luck.
I have searched and tried everything I can find on Google and in forums.
I have checked and edited my .htaccess file.
I have reset my permalinks – they are set as custom (/%post_name%/).
Setting permalinks to default causes a “Server Not Found” error.
I have deactivated all plugins, should I delete them as well?

I’m using Fluid Blue 1.7.2 by Srini G as a theme.

Here are 2 URL’s for my site, I created a second unedited page so people could see exactly where I’m coming from. The first is the unedited page, which I want to split up:

Renegade Rescue

The second shows the edited page, hopefully with the errors:

Renegade Rescue-2

I’m not exactly a newbie, I’ve built a website (self-coded, not wysiwyg) and I understand XHTML and CSS, but this problem has me beat!

P.S. index.php and .htaccess files are in the server root directory,
all other WordPress files are in a separate WordPress sub-directory.