The machine that hosts Pi-hole uses whatever DNS servers you've configured for it.
From your explanations, it would seem you had configured it to use Cloudflare's 1.1.1.1 only.
Accordingly, any outbound DNS requests initiated by processes on that machine would have been sent to 1.1.1.1 (i.e. they are not passing through Pi-hole at all), and Cloudflare -of course- doesn't know how to resolve your local fritz.box.
Note that inbound DNS requests on that machine (as sent by your clients) will correctly be received by Pi-hole and forwarded to its configured upstream DNS servers.
Both your solution approaches -editing /etc/hosts or /etc/dhcpcd.conf- are sucessfully addressing missing resolution for fritz.box.
Alternatively, if you want DNS requests by your Pi-hole host machine to pass through Pi-hole, you could replace 192.168.178.1 by 127.0.0.1 in your dhcpcd.conf. It's only then that Conditional Forwarding (or using your FB as Pi-hole's only upstream DNS server) becomes relevant for your host machine's DNS requests.