My understanding is that the bullet causes a displacement of fluids - air, water, blood, etc... as it travels. When it passes through an animal, the fluids in the animals body react to that displacement. The violence of the reaction is relative based on the size of the animal and the size of the bullet's displacement. The mass and velocity of the bullet dictate the amount of displacement - obviously bigger and faster lead to greater displacement. Objects (or animals) that are small compared to the area of displacement have a more violent reaction, but those whose mass greatly out measures the displaced area are more able to absorb the shock. That is why a .22 (relatively small displacement) hitting a milk carton full of water makes a little hole, but a 30-30 (considerably larger displacement) makes the carton go boom. So, if the animal is small enough that it cannot absorb the shock of the displacement of the .17, then yes, hydrostatic shock can occur.