I think your problem is due to your site having 3 levels in its navigation menu (gallery index pages grouped under other gallery index pages). Showkase natively supports only 2 levels in its navigation menu and it is not possible to group a gallery index page under another gallery index page in the interface. A gallery index page can be only a top-level menu item.

Normally, when viewing a top-level page, the navigation menu displays all top-level links and also links to pages grouped under the current page. When you select a second-level page, the navigation menu remains the same.
Your problem seems to occur when you select a third-level page (a gallery grouped under a gallery index page grouped under another gallery index page). Everything in the navigation menu displays and works as expected until a third-level page is selected when the navigation menu displays only top-level links.
I'm not sure how you achieved a third level but Showkase was not designed to support or handle this. (It sounds like you would need a third row of links in the navigation menu and this is not something that Showkase has ever been able to do.)

As far as I am aware, there were no changes between v1.6.1 and v1.7.0 with regard to the navigation menu.
Perhaps you had made some manual modifications to the v1.6.1 source files (or maybe to your theme's 'custom.css' or 'custom.js' files) which were overwritten when you upgraded to v1.7.0.

If you are sure that v1.6.1 displayed the links in a way that v1.7.0 does not, then I would not ordinarily recommend using an older version of any software but maybe reverting to v1.6.1 might be the easiest remedy for your problem (as long as your site does not suffer from any of the bugs fixed in v1.7.0).

Incidentally, we have a dedicated Showkase forum here.