There could also be other problems but that version of Lightbox is incompatible with jQuery, so get rid of this:
It doesn't look as though you're using it anyway. If you are, there are other versions of Lightbox as well as Lightbox like scripts that use jQuery instead of Prototype/Scriptaculous. So if you need jQuery, you would have to use one of those other box scripts. Even if you don't need jQuery, some of those other box scripts that use jQuery are better scripts.
That should fix the larger image opening in another tab. The problem with the thumbnails not showing up is that there are no img tags for them. The Lightbox links are only text links. To have a thumbnail, you need the thumbnail version image of course, and you need to do something like so in the markup:
<a href="images/projects/test/ARTISAN_TRAILER.jpg" rel="lightbox[TEST]"><img src="images/projects/test/ARTISAN_TRAILER_THUMB.jpg" border="0"></a>