$('.races-main-image') will select all elements with that class, even the ones which aren't currently visible.
You can select the closest '.races-main-image' to the clicked element as per the code below (when placed inside the click event handler)
$('.races-main-image', $(e.target).closest('.races-fancy-box'))
So your new code should look like:
$('.races-thumbnail').live("click", function (e) {
var racesmainimage = $('.races-main-image', $(e.target).closest('.races-fancy-box'));
var racesimagewrap = $('.races-image-wrap', $(e.target).closest('.races-fancy-box'));
racesmainimage.hide();
racesimagewrap.css('background-image', "url('http://www.goodwood.co.uk/siteelements/images/structural/loaders/ajax-loader.gif')");
var i = $('<img />').attr('src', this.href).load(function () {
racesmainimage.attr('src', i.attr('src'));
racesimagewrap.css('background-image', 'none');
racesmainimage.fadeIn();
});
return false;
});
I've also removed your 'e.preventDefault();' return false; includes that, and was preventing e.preventDefault() from being executed in any case.