WP Custom theme pagination breaks

<?php get_header(); ?>

                <div id="container">
                        <div id="content">



<?php query_posts("posts_per_page=5"); ?>
<!-- Start the Loop. -->
 <?php if ( have_posts() ) : while ( have_posts() ) : the_post(); ?>

 <!-- The following tests if the current post is in category 3. -->
 <!-- If it is, the div box is given the CSS class "post-cat-three". -->
 <!-- Otherwise, the div box will be given the CSS class "post". -->
 <?php if ( in_category('3') ) { ?>
           <div class="post-cat-three">
 <?php } else { ?>
           <div class="post">
 <?php } ?>

 <!-- Display the Title as a link to the Post's permalink. -->
 <h2><a href="<?php the_permalink() ?>" rel="bookmark" title="Permanent Link to <?php the_title_attribute(); ?>"><?php the_title(); ?></a></h2>

 <!-- Display the date (November 16th, 2009 format) and a link to other posts by this posts author. -->
 <small><?php the_time('F jS, Y') ?> by <?php the_author_posts_link() ?></small>

 <!-- Display the Post's Content in a div box. -->
 <div class="entry">
   <?php the_content(); ?>
 </div>

 <!-- Display a comma separated list of the Post's Categories. -->
 <p class="postmetadata">Posted in <?php the_category(', '); ?></p>
 </div> <!-- closes the first div box -->

 <!-- Stop The Loop (but note the "else:" - see next line). -->
 <?php endwhile; else: ?>

 <!-- The very first "if" tested to see if there were any Posts to -->
 <!-- display.  This "else" part tells what do if there weren't any. -->
 <p>Sorry, no posts matched your criteria.</p>

 <!-- REALLY stop The Loop. -->
 <?php endif; ?>


<div class="pagination">
<?php
global $wp_query;

$big = 999999999; // need an unlikely integer

echo paginate_links( array(
    'base' => str_replace( $big, '%#%', get_pagenum_link( $big ) ),
    'format' => '?paged=%#%',
    'current' => max( 1, get_query_var('paged') ),
    'total' => $wp_query->max_num_pages
) );
?>
</div><!--END .pagination-->

<?php //Tried enabling/disabling this, but does not help
//wp_reset_query();  // Restore global post data
?>


                        </div><!-- #content -->
                </div><!-- #container -->

<?php get_sidebar(); ?>
<?php get_footer(); ?>