Of course. It is just software after all. However, we do not provide a theme that does this. Nor am I familiar with such a theme done by anyone else.
Your biggest problem in doing this would be providing the pagination. As you might realize, for pagination to work your script has to be able to "predict" what image should be displayed on which page.
Using the object model framework you could modify a theme to display the album and the images of it's subalbums but pagination would then be used for the current level of albums displayed .
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Your biggest problem in doing this would be providing the pagination. As you might realize, for pagination to work your script has to be able to "predict" what image should be displayed on which page.