I am targeting a specific keyword, which I have both in my domain name and blog header. Now, since I am using a blog format, these keywords are obviously not on the main domain. For example, the keywords are on domain.com/post1, not on domain.com Will this hurt me SEO-wise? Does this mean that domain.com won't rank for the keyword? My main goal is to get domain.com to rank for the keywords, not the individuals posts.
sure - it would be better to have your kw in your domain - but if you have your kw in what looks like your sub-directory - don't worry about it. Make sure you have your KWs on your page and title tag as well.
Having keywords in post URL is the second best thing. You can say that 1-2 pages on the first page will have keywords in domain, rest of the results will not have keywords in domain.
at least one keywords need to be there in title and description tag to rank it, and for the relevancy must include it in home page content. without the keywords in content it is also possible to rank the website but for this you would require more back links with keyword there in anchor text. you need to make popular your website for that particular keywords and service.