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Given that народ is connected to род, and has to do with birth, and нация derives from the Latin natus, past participle of nasci (being born), is there any difference between the two terms?
I have been instructed that народ should be referred to peoples like the Komi, Yakut, Chuvash, i.e., minorities in the Russian Federation, while the Russian people make up a нация, but I suspect this is not the whole truth.
In most cases you should use "народ", including the case of Russian people. Sometimes you may use "национальность" to refer either ethnicity as a person's quality or a small народ.
You normally do not use the word "нация". It is mostly used in translated texts so to translate what English language denotes as "nation", a pompous reference to a state or a power. Some neo-Nazi also may use this word in idioms like благо нации, нация превыше всего. This usage has racist overtones.
Anyway, нация is pompous, high-style and rare. Народ is unmarked to refer a people, страна is unmarked to refer a country.
It is also worth mentioning that народ can be counter-posited to the elite (similarly to the English word "people"), but can include the elite as well, while нация always includes the elite.
Он считал, что принадлежит к элите нации. = He thought he belonged to the elite of the nation.
Он был на равных с (простым) народом. = He was on par with the (simple) people.
Both народ and нация originate from Latin natio, though the former is a calque while the latter is a borrowing.
Both terms are polysemic, but according to majority of views, нация is a political entity while народ is cultural, ethnical or linguistical entity.
The two are often used interchangeably.
As is the case with many philosophical terms, different authors cannot agree on exact definitions.
According to Большой энциклопедический словарь:
НАЦИЯ (от лат. natio - племя, народ), историческая общность людей, складывающаяся в процессе формирования общности их территории, экономических связей, литературного языка, этнических особенностей культуры и характера.
and
НАРОД , 1) все население определенной страны. 2) Различные формы исторических общностей (племя, народность, нация).
Word народ generally refers to a large group of people with a common something (culture, customs, language, interests, etc.), normally also within the same geographical boundaries. The word normally infers actual physical people. It is also often used to describe a large crowd of people gathered in a particular place.
Там собрался у ворот // Этот, как его, народ.
(Л. Филатов)
Word нация refers to an abstract group of people with the same ethnic origin. It's very closed translated into English as nation and has the same meaning. This word does not have to infer physical people (although it could) and can simply mean some abstract group of the same nationality.
Нация без литературы нелюбопытна.
(З. Прилепин)
When referring to an ethnic minority, you can use both words, depending on what you want to say, keeping in mind the differences I described above.
