How to update Joomla 1.7 to 2.5 manually
To manually upgrade Joomla from version 1.7 to 2.5 you need the 2.5.0 update package. You can find it in the download section of the official Joomla site.
After you download it on your local computer either unpack the archive and upload its content via FTP in the root Joomla directory on your Joomla hosting account, or upload the archive without unzipping it and then unpack it directly in the root Joomla directory on your account (you can do this from the Files section of the Pixie control panel, or, of course, through SSH). This will overwrite the Joomla files and replace them with the ones from the newer version.
After this, check for the files and folders that you have to remove from your Joomla. They are listed in a file named scripts.php which you can find both in the update package on your local computer and on your hosting account. The path to that file is (in relation to the root directory) administrator/components/com_admin/scripts.php. The files and folders to be deleted are listed at the end of the file. Probably not all of them will be actually present in your Joomla installation.
Another very important thing that you have to do to complete the upgrade is to update the database used by the application. You can do this by executing some SQL queries. You can find the files with the SQL commands in the update package and on your account (administrator/components/com_admin/sql/updates/mysql). The queries that you have to perform depend on your 1.7 version. For example, if your version is 1.7.4, you can start directly with the queries for version 2.5.0.
You can use phpMyAdmin to perform the queries. It's accessible from the Databases section of the Pixie control panel. In phpMyAdmin navigate to the particular database, click on the SQL tab, copy the query from the file to the textarea on the SQL tab page, replace the necessary part (e.g. #__) with the table prefix of your database, and click on the Go button.
For more details read the tutorial on upgrading Joomla 1.7 to 2.5 manually.