I've been looking for some kind of statement on this. With 1.6 no longer supported in less than 4 weeks time it would be handy to know what will and will not work with 1.7. For me it is the extensions that I need some kind of clarification on.
i will blog post this shortly but the gist of the situation is this:
Joomla 1.7 is essentially the next 'update' for 1.6.5, so you just upgrade to it like you did 1.6.4->1.6.5, and now it's 1.6.5->1.7.
Theoretically there should be no major issue with running 1.6 compatible extensions on 1.7. In reality there are potentially some issues as there are some minor changes and also some minor new additions in 1.7. Ie, it's not solely a security or bug fix release, but it is still a minor update.
You must be running Gantry 3.2.7 for 1.6 for things to function in 1.7, that's really the only major criteria for RocketTheme. Everything else works as-is. We have found a couple of minor issues related to the newer version of MooTools in 1.7, but we will roll out these fixes as we find them. Nothing major though.
So, you really SHOULD upgrade to 1.7 as 1.6 is going away, and 1.7 is the only option for continued support of Joomla and 3rd party extensions.