If anyone else runs into the same problem as I did i.e. a white border on the bottom and right edge of the gallery, here's the fix:
I ticked the iframe option in the NextGen Smoothgallery options page.
In your main css file create a new selector called 'iframe' and give this the exact width and height of you gallery in pixels. Also specify a background colour to match your site. This should fix the white border in IE 7 and 8.
For some reason the gallery was adding 2 pixels to the width and height which was causing this issue.
Hope this helps someone.