How to display an issue title in markdown

As I mentioned in the comments, I don't know of any existing tool or functionality for this.

Generate markdown

The closest thing for this may be to use a document generation tool like mkdocs or sphinx to generate markdown using a custom plugin. For example, a modified version of the mkdocs-gitlab-plugin could use the API to retrieve the title and render the title in the doc.

Tampermonkey

To get the effect you're looking for locally, a tampermonkey script can do this as well. However, this will only be a local effect.

// ==UserScript==
// @name         GitLab Ref changes
// @namespace    http://tampermonkey.net/
// @version      0.1.0
// @description  Change issue references hyperlinks from #123 to their title
// @author       Spencer Phillip Young
// @match        https://gitlab.com/*
// @grant        none
// ==/UserScript==

(function() {
    'use strict';

    function gitlabRef() {
        const anchorElementList = Array.from(document.getElementsByTagName('a'));
        anchorElementList.forEach(function(elem) {
            if (elem.getAttribute('data-reference-type') == 'issue') {
                if (elem.getAttribute('title')) {
                    elem.innerHTML = elem.getAttribute('title');
                }
            }
        });
        setTimeout(() => {
            gitlabRef();
        }, 2000)
    }

    setTimeout(() => {
        gitlabRef();
    }, 1000)
})();

Before:

After:

Notice the link for #340125 changed to its current title: Usage quotas pagination jumps to "seats" page

Though, in principle a more intelligent monkey could probably make a tamper script that makes this change when authoring merge requests or other markdown. So, as long as you (or someone who also has such a script) authors your release notes, everyone will get the benefit of it.

Webhook to alter MR description

Last idea may be to have a webhook respond to MR create events and rewrite #123 to [issue title](link to issue) in the description.

With GitLab 14.6 (December 2021), you have another (new) option:

Render the title of a referenced issue within markdown

When referencing issues, epics, or merge requests within markdown fields, there was previously no way to surface and display additional context other than the ID.

You can now append + to an issue, epic, or merge request reference to render the title.

See Documentation and Issue.