Change the folder name for the directory WordPress is installed in
I'm pretty sure you have to also change it in the database before you go changing the folder name. Try going to settings->general in your wp-admin area and it'll be one of the first few input fields there.
So, change those two fields, save (the page might not come back however), then change the folder name.
Step 1 :
Go to settings->general and update your Site Address (URL) and WordPress Address (URL) to http://example.com/new_folder_name
step 2 :
Rename the folder name from wordpress to blog
step 3 :
Add this to wp-config.php file :
define('WP_HOME','http://example.com/new_folder_name'); define('WP_SITEURL','http://example.com/new_folder_name);
Please clear your browser cache and relogin.
You don't have to touch the database settings. And all the instructions at codex (http://codex.wordpress.org/Giving_WordPress_Its_Own_Directory) are overly complex. Believe it or not, ehow.com has the best step-by-step answer for this task:
http://www.ehow.com/how_6558163_changing-wordpress-directory-name.html