Embedded Gallery2 worked OK for me with Drupal 4.6, but now I upgraded to 4.7 and have a problem. There is quite a number of posts on URL rewrite problems related to Gallery2 integration; it is said that there should be a separate .htaccess file for the Drupal-embedded gallery module (different from the Gallery2 one).
I created a separate .htaccess file for the embedded gallery, and tried placing it in a variety of directories (Gallery2/subdir, Drupalroot/subdir, etc.), but when I change any Gallery2 URL rewrite settings, these changes are recorded both in the Gallery2 .htaccess and in the embedded .htaccess files.
In the standalone mode, Gallery2 works OK, but the embedded gallery does not let me browse any albums -- with Gallery2's default "v/%path%" URL rewrite setting, album links are wrong and lead to a 404 error; if I change it to "gallery/%path%", the links look like what they should be (siteURL/gallery/albumname), but clicking on any album still displays the main gallery page embedded in Drupal instead of opening the album.
Using the Drupal root .htaccess file for the embedded gallery (as some people suggest) does not help, either -- all Drupal links stop working at all.
Are there any rules that I'm missing?

Some related posts:
http://drupal.org/project/issues/gallery
http://drupal.org/node/65033
http://drupal.org/node/59866