Fantasy Fest is a blast - a drunken, naked blast. Be prepared to see a lot of nudity and frivolity. You will have the time of your life!!!! And what happens in KW stays in KW.
As for the diving this is a good time to dive. The rainy season is over, the temps are nice and the viz is great. IMO the best diving is around Looe Key/Bahia Honda area. You can take the State Park snorkel boat (snorkel only) out but the private dive charters are better. Boats leave out of Big Pine all the way to Marathon. Of course Pennekamp State Park, Spiegal Grove areas of Key Largo are also nice.
Aerose (name on this site) has logged more dives than anyone i know in the Keys and is a great resource.