Here is a little fix for the jQuery plugin FancyBox 1.3.1.
If you have encountered the same issue as me with the images display on IE, here is the solution:

In the file jquery.fancybox-1.3.1.css, you can see this for Internet explorer at the end of the file

/* IE */

#fancybox-loading.fancybox-ie div	{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_loading.png', sizingMethod='scale'); }
.fancybox-ie #fancybox-close		{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_close.png', sizingMethod='scale'); }

.fancybox-ie #fancybox-title-over	{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_title_over.png', sizingMethod='scale'); zoom: 1; }
.fancybox-ie #fancybox-title-left	{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_title_left.png', sizingMethod='scale'); }
.fancybox-ie #fancybox-title-main	{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_title_main.png', sizingMethod='scale'); }
.fancybox-ie #fancybox-title-right	{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_title_right.png', sizingMethod='scale'); }

.fancybox-ie #fancybox-left-ico		{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_nav_left.png', sizingMethod='scale'); }
.fancybox-ie #fancybox-right-ico	{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_nav_right.png', sizingMethod='scale'); }

.fancybox-ie .fancy-bg { background: transparent !important; }

.fancybox-ie #fancy-bg-n	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_shadow_n.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-ne	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_shadow_ne.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-e	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_shadow_e.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-se	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_shadow_se.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-s	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_shadow_s.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-sw	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_shadow_sw.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-w	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_shadow_w.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-nw	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='fancybox/fancy_shadow_nw.png', sizingMethod='scale'); }

Just replace all the AlphaImageLoader src by the absolute URL of your js folder, let say you have a folder /js/fancybox/ (where js is located at the root of your folder system eg mywebsitefolder/js/fancybox/), just change the src like that:

/* IE */

#fancybox-loading.fancybox-ie div	{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_loading.png', sizingMethod='scale'); }
.fancybox-ie #fancybox-close		{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_close.png', sizingMethod='scale'); }

.fancybox-ie #fancybox-title-over	{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_title_over.png', sizingMethod='scale'); zoom: 1; }
.fancybox-ie #fancybox-title-left	{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_title_left.png', sizingMethod='scale'); }
.fancybox-ie #fancybox-title-main	{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_title_main.png', sizingMethod='scale'); }
.fancybox-ie #fancybox-title-right	{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_title_right.png', sizingMethod='scale'); }

.fancybox-ie #fancybox-left-ico		{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_nav_left.png', sizingMethod='scale'); }
.fancybox-ie #fancybox-right-ico	{ background: transparent; filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_nav_right.png', sizingMethod='scale'); }

.fancybox-ie .fancy-bg { background: transparent !important; }

.fancybox-ie #fancy-bg-n	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_shadow_n.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-ne	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_shadow_ne.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-e	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_shadow_e.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-se	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_shadow_se.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-s	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_shadow_s.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-sw	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_shadow_sw.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-w	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_shadow_w.png', sizingMethod='scale'); }
.fancybox-ie #fancy-bg-nw	{ filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='/js/fancybox/fancy_shadow_nw.png', sizingMethod='scale'); }

There you go, the image will be displayed as expected and it will work on every browser IE6/7/8, Chrome, Firefox, Opera, Safari, etc. Sweeeeeeeeet isn’t it? :)

Hope it helped you out!

J.