Fancy is a term for imagination that is light, playful, unreal, and whimsical: "I often indulge in the happy fancy that I am both rich and powerful." "Sue's belief that she is irresistible is merely her playful fancy." "She let her fancy play with the idea of a luxurious trip to Paris." Fantasy is applied to that kind of fancy that is unrestrained, extravagant, and erratic: "It is a dangerous fantasy to believe that you can fly through the air by flapping your arms." "The fantasy of this artist resulted in paintings that are weird and unbelievable."
Dictionary of problem words and expressions. Harry Shaw. 1975.