I think I can help your. I had a very similar problem, slideshow work in IE only for the first time, but when I reload page or follow by link - the loading animation is just shown, like in your case.
But I found some site, where slideshow work fine in IE8, so I analyzed the code and find the differences in versions of this file:
_____________NextGEN V1.7.4(installed on my site)___________________
__________and NextGEN (Unknown version) (some site)_________________
As you can see, there is a difference: ver=1.05/ver=1.03, so I just download ngg.slideshow.min.js?ver=1.03 and replace ver=1.05.