As the widget system works fine on every Elgg 1.7.1 install I know about, the problem is clearly in your server-specific setup (or perhaps you are using a very unusual browser - but you say "all browsers").

The nightly builds are Elgg 1.8 alpha code and are there only for curious developers so I suggest that you do not use those. But Elgg 1.7.1 should work.

It's usually a good idea to provide more details than "this does not work" when reporting problems.

Eg. what browsers do you see the problem in?

Do you have any non-core plugins installed? (If so, disable them and try again.)

What hosting provider or server configuration do you have?

Maybe, there is a problem with the template ...?

What is odd is that the same server supports a 1.6.1 installation with no difficulties.  Are there new library version requirements?  I am running php 5.2, which appears to be the right version for 1.7.1.. thoughts.  

Sean