Yes, do what Alan is suggesting.
Create the blog.yourdomain.com folder on your own server and then put in 301 redirects from blog.yourdomain.com to your www.yourdomain.com/blog
After the redirects are setup, change your DNS from Wordpress.com to your installation of blog.yourdomain.com.
On Apache servers you just need to create a htaccess file in your blog.yourdomain.com folder, but I don't have any experience with IIS/ASP server.