I have the blog app enabled for User Profiles however, in the "Story Form" I have it set to NO so that the creation of blogs is disabled. However, in the left panel under apps the Blog App appears and if clicked the user can still create a blog.
See here:
http://screencast.com/t/fimkIRfEZIm
I would suggest the following:
1. Add a new setting to disabled the addition of blogs from both the app and the story (prefered)
2. Adjust the current setting to include both
James