So, everything seems to be set up correctly. The setting in your step 2 is everything that needs to be done. I won’t be able to help you without seeing how the theme’s template files are structured.
The way it usually works when you apply the setting in your step 2 is that WordPress looks for a template called front-page.php, if it doesn’t exist then WordPress uses index.php.
Now, one of these templates must use the regular post loop, that is
if ( have_posts() ) : while ( have_posts() ) : the_post()
I assume that this loop is not present in your index.php or front-page.php files, and this is why your posts are not showing.
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