There is no such thing as a second dynamic page for posts in a blog as you describe it above ie. a blog within a blog.
All posts will display in reverse chronological order on the front page of your blog by default.
(1) There is only one page we can post to in any blog and
(2) The static pages http://en.support.wordpress.com/pages/ we create do not automatically update.
Only the dynamic pages like Archives, Categories and Tags created by the software when we publish a post will update automatically update with new posts.
By default the front page of the blog is the post that displays all posts in your blog. Though there is only one dynamic page in a blog for posts (not pages) http://en.support.wordpress.com/post-vs-page/ and we cannot post to more than that one page, we can create the appearance that we have posted to more than one page.
We organize posts by assigning categories to them. You can create a custom menu and add the dynamic categories pages into the custom menu.
We can also add other items into a custom menu like static Pages http://en.support.wordpress.com/menus/#adding-pages but as I said above no static Pages will ever automatically update.
There are many common errors, misunderstandings and misconceptions when creating custom menus and there are some tweaks you can use to improve your custom menu as well.