Changed theme as you suggested. Disabled a few plugins which could interfare and I reset all Nextgen Settings. I also upgraded to Nextgen PRO however same problem (Page 404 error) still appears when clicking on Page 2 of the thumbnail gallery.
I am a little afraid of switching off the default theme as I might lose certain settings. However the problem only appeared when I upgraded the software. Could it be a bug in the new software? Will the PRO version solve this problem?