Cliff, you're my hero! =)

I modified it slightly and ended up with:

location = / {
if ($is_args) {
proxy_pass http://blog.foobar.com; # wordpress
}
proxy_pass http://www.foobar.com; # django
}


It works great and that is all that matters.

To address your question with sub-domain or folder -- it's a matter of having a pretty URLs and a seamlessly integrated blog and site. =)