Your build dir isn't your build dir, if you see what I mean.
All the symbolic links point to /usr/src/linux-headers-2.6.17-12, so that is where the building really gets done, not /usr/src/linux-headers-2.6.17-12-386.
The lack of the top-level Kbuild concerns me a bit but I can't see where the Makefile uses it so that may be OK.
By all means go ahead and build - if it works and problems persist it will be time for a rethink