tolgaaaltas
Sorry about that. It is because it is looking for any "#" character to know when to add a link. Certain extensions may be coded in such a way that the JavaScript in this extension breaks them because it's not smart enough to ignore certain # characters. Most of the time the JavaScript ignores behind the scenes hashtags, but it depends.
If you really love fancybox, you'll have to remove this extension. But, if you'd rather have hashtag links, remove fancybox.
Or, you could go with a different symbol. The only issue is, because of Twitter, so many people are very used to tags being #thetag. So, if you use a different beginning identifying character, your forum members would have to get used to using it instead of "#."
For example, you could go with "+." Your tags would then look like: +thetag. This way, there will be less conflicts because a lot of HTML and CSS uses #... but not + or another special character.
If you want to mess around with this, go to line 29 in this extension's extend.php file. You will see this:
entries[i].innerHTML = entries[i].innerHTML.replace(/#(\S+)/g,'<a href="/?q=$1" title="Find more posts tagged with #$1">#$1</a>');
Right after innerHTML.replace
you will see (/#
; change that # to another character.
Another problem with this though is if I ever release a new version of this extension and you update... you will lose this change. But, it's quick to edit and change back.