If I follow what you're saying...
You're have your index at
http://www.you.com/blog/index.htmlAnd you're using htaccess to make it show at
http://www.you.com/But you're also looking for it at
http://www.you.com/index.html
I don't think it's meant to work that way. Not saying it's impossible, I don't know offhand how you'd do that. Showing it at
http://www.you.com/ would be all you need, yes?
Yeah, your htaccess probably invisible when you look via ftp, it's a system file and doesn't show. You might be able to force your ftp program to show hidden files. I just usually write over the old one (when I know what's in the old one)
The index.html file isn't actually moving, you're just telling the server with htaccess to make it LOOK like the index file is up a level from where it really sits.
Hope this helps, please post back with questions.
Brenna