Old blog/ and blog/feed/ URLs not working after moving blog to top-level via .htaccess

You can skip the first Part of your .htaccess, just use the standard WordPress configuration.

The main problem is, you need to create a new index.php in the root directory of your webspace, containing the following:

<?php
/**
 * Front to the WordPress application. This file doesn't do anything, but loads
 * wp-blog-header.php which does and tells WordPress to load the theme.
 *
 * @package WordPress
 */

/**
 * Tells WordPress to load the WordPress theme and output it.
 *
 * @var bool
 */
define('WP_USE_THEMES', true);

/** Loads the WordPress Environment and Template */
require('./blog/wp-blog-header.php');
?>

You also need to create a .htaccess file in your root directory, containing the standard WordPress .htaccess, and then everything should work fine.