Again, this is straying into the realm of the semi-documented, but see the thread "browse to another folder in explorer context menu shell extension" above. Once you have the IShellBrowser interface, you can call its QueryActiveShellView method to obtain the IShellView interface implementing the SelectItem method.
Alternatively, if you implement IObjectWithSite in your shortcut menu handler, your SetSite method receives an interface that can be queried for IServiceProvider. You can then query for the SID_SFolderView/IID_IFolderView service which allows you to call IFolderView::SelectItem. (The IFolderView can also be queried for IShellView.) I expect this only works from Windows 2000 onwards though.
For converting full filesystem paths into ID-lists there is SHParseDisplayName (XP only), or the desktop folder's IShellFolder::ParseDisplayName method (all platforms). Each filesystem folder can also parse paths relative to itself.
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Jim Barry, MVP for Windows SDK