You must have threaded comments v2 installed for this to work. Edit blog template, expand widget templates, find lines:
<b:includable id='comments' var='post'>
<div class='comments' id='comments'>
<a name='comments'/>
<b:if cond='data:post.allowComments'>
After those lines, just before line that contains <H4>, add this code:Save template. You're done.

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Smileys :) ;) :P :D :( and ;( are converted to graphical emoticons in the blog.