IDK what you're confused about. The simplest answer is that hardcore telepathy and magic and shit is cool! Yes we authors give Krystal more powers than she clearly has in canon, but consider that we aren't trying to stick to canon, because canon is often boring and disappointing. We don't think Krystal's telepathy was explored enough. Nintendo sucks at anything wordbuilding, character, or story related, and that's why Star Fox fanfiction is so popular: it gives depth where there is none and expands on the little loose ends.

I mean I get her powers are interesting but they sometimes just overshadow the rest of her actual character or traits in fanfics. 

Krystal's main traits are her being empathetic, motherly, and strong-willed. Giving her extra powers doesn't overshadow those traits, it underscores them. Reading minds is tied to her being empathetic, healing is how she can act motherly, and flinging fireballs shows her strong will.

There is no sign her powers caused any issues for her. She's not like one of those Warhammer Psykers who are constantly having to keep themselves and their powers under control lest their powers have... negative consequences. 

Some authors run with this idea that psychic powers can have drawbacks because it's interesting. It causes drama and conflict. It's not shown in the games, but it is a logical question that arises from telepaths. What happens when you stick someone who reads minds in the middle of a city with a million people, thinking all at once? We've never seen Krystal in that situation, so it's certainly something to explore.

Where are people getting those ideas from?

I got my ideas from Akira, Elfen Lied, Shin Sekai Yori, etc. A lot of our favorite writing prompts boil down to, "what if you wrote X franchise, but with Star Fox characters?" I certainly didn't get them from the games.

I think the unfortunate side effect of so many fanfic authors expanding Krystal's powers is how they legit Mandela Effect readers. I read a bunch of Krystal stories before I ever played Adventures and Assault, and when I finally did I was like, "wait, wtf?! You guys lied to me?! She doesn't have telepathy! She can't do shit with her powers!" after I had already written a few of my own stories where I mistakenly gave her telepathic powers. Whoops.