Fancybox works properly in all other browsers. Only IE can't show it properly. The problem is clearly illustrated in the following screenshots:
http://img840.imageshack.us/img840/481/subscreens.jpg
I can't figure this out. IE seems to work fluently on fancybox original website's examples.
I wonder if I can answer my own question. But since I figured out what the problem was. I feel like i should share.
The thing was, my page had no doctype declared. I added this piece of code and everything works now:
<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd">