The input offset voltage of the INA125 is +/- 250uV max for the standard grade, and +/- 500uV max for the A-grade. So your zero-load reading of 160uV is within tolerance. However, if you are running it from a single +5V supply, there is another consideration. The INA125 does not have rail-to-rail output. The datasheet quotes the minimum output voltage as 0.3V worst case, 0.15V typical. You are getting (17 * 3.3)/1024 = 0.05V, so you are actually doing rather well. To do better, you need to provide the INA125P with a negative supply voltage on the V- pin. If you have a spare PWM pin, you can generate this quite easily, like this:
The bottom rail is ground, and Vi is the PWM pin. Put a 100 ohm resistor in series with C1 to limit the peak output current from the pin. You can get about -3V output from this at low currents using ordinary diodes such as 1N4148, or about -4V using Schottky diodes such as BAT85. Set the PWM to 50% using analogWrite(128).