I tried adding
define( "BP_HOME_BLOG_SLUG", 'blog' ); to my wp-config file and when I visit /blog/ in my browser I still get a “Page Not Found” and the index.php template is not being used. I’m at a loss. I have my reading settings set to “Your latest posts”.
Up until the most recent trunk, the homepage of my site used home.php (with my custom query) and /blog/ used index.php (with the standard loop).