Is it possible to do that, while also having the the /blog page be the archive page that supports pagination?

I am guessing that it would require blog.htm to accept and respond to two different types of parameters (1 - paging for archive, 2 - single posts ), and I'm wondering if there's an established way to do that.

Did you ever figure this out?

You should be able to simply update the url in the page template

/blog and /blog/:post are treated as two different pages and can be two different pages