I've tried as suggested from http://groups.google.com/group/facebox/browse_thread/thread/7f9a27e078998ddb but it still won't work.
I changed the preloader image to direct path e.g. http://example.com/css/facebox/ajax-loader.gif
Even if you go to their website http://chriswanstrath.com/facebox/ the preloader image doesn't show.
Hmmm, I don't really use facebox but having a quick look at the source code, it seems that the plugin is in the process of major upgrade and still not stable (maybe the whole 1.3), here are my comments:
line 106
in the facebox.js file from:$('#facebox .body').children().hide().end().
$('#facebox .content').children().hide().end().
Please try it and give me your feedback, and please keep following the developer for any updates!