No term works great here, but I am highly skeptical of an American reader's ability to read past the first two, much more common, definitions for 'fabulous', as in 'very good'. If I took this path at all, I would probably choose "fantastic" with option to use "fantastical"; both words have the common adverb "fantastically" and the noun "fantasy", as in "fantasy world" at Disneyland or the film "Fantasia".
The link to fairy tales is less direct, but well established in discourse on the real and the fantastic.
I checked Doroszewski and found his examples better suited for the above terms, such as "bajecznie kolorowe chustki", "oświetlone bajecznie"; "bajecznie zdrowy"

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Note added at 52 mins (2009-08-31 11:57:35 GMT)
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Again, my proposal is from one of the two terms submitted. Also note that although "bajka" CAN be a "fable" (Bajki Ezopa), it is usually a kind of "fairy tale" (which in Polish is really "baśn"), and it is from this angle that the meaning of the term "bajeczny" is derived.

Propozycja

Give it a whirl. ;)

You could comfortably alternate the words used.

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Note added at 12 hrs (2009-08-31 23:35:35 GMT)
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