A problem with a custom query is that the posts_per_page resets before the page loads. So if you got 10 posts, than you only have one page, because the default posts_per_page is 10. If you have 11 posts than you will see the second page, but not beyond that.
Solution for this is changing your posts_per_page settings in the back-end: Settings > Reading > Blog pages show at most > 3. But this will change all archive page settings. Quick fix for this is adding
<?php global $query_string; query_posts($query_string . '&posts_per_page=10'); ?>
at the top of your archive templates where you want the default posts_per_page.