WordPress Shortcodes not working right with NEXTGEN gallery

I am building a wordpress template from scratch for my web. Everything was going so smoothly until I decided to add gallery functionality to it. Naturaly my pick was NEXTGEN gallery plugin which I already had used before in other web projects.

Problem appeared when I wanted to add slideshow to my static frontpage named index.php nothing happened. I used do_shortcode function and echoed result, but all I got was unfiltered text like [ slideshow id=1 ].

It was driving me crazy so I tried next:

• adding shortcode to content of another page (which again failed like example above)
• adding echo apply_filters('the_content', $post->post_content) to template file and add_filter('the_content', 'do_shortcode', 11) to functions.php file (which resulted in image list showing, which got me thinking that shortcodes were in fact working)
• registering dynamic sidebar and adding NEXTGEN default widgets to it using old fashioned widgets functionality (slideshow widget still not working only loading.gif appears but never loads anything)

My question is do I need to initialize short-code functionality somewhere for custom build themes? Since I really needed some hooks to get it up and working.
Does anyone know for some incompatibility issues with new WP and NEXTGEN?

WP version 3.4.2
NEXTGEN version 1.9.7

I’ve tried disabling and re-enabling plugins and that didn’t do any good…

Thanks in advance,