Even though the question at hand is whether the "genre" of art-games is foremost "art" or "game", one must first try to answer two prerequisite questions.
#1: "What is art?"
and perhaps even more importantly
#2: "What is game?".
Assuming my own definition, "art" can loosely be described as a conscious observation and/or evocation.
With that settled, "game" is form. Form, as proven in writing, painting, photography, performance and film, is capable of artistic expression.
Hence, games can most certainly be art.
Having the artistic merit of games established, one must further distinguish the rudimentary characteristics of the form.
This is where it get's complicated.
Does one limit the definition of games to the efforts and executions of a single market and it's target audience?
Isolate it to entertainment, thus deeming more abstract creations pretentious?
Establish the idea-driven aspect as it's basis, only to have amusement conveyed as moronic?
Taking a step back, is it not obvious (as art in the major sense) that one cannot, should not exclude the other?
And has it not been proven that the two do can merge quite successfully without diluting the impact of either quality?
It is after all, in all senses of the word, interactive experience.