Great episode guys. Jeff, worry not; this was "good." Welcome to the couch.
Now, a couple things. Brian mentioned handguns, which I have some experience with. While I fully accept the fact that they only exist for one purpose, I submit this example:

This is a Springfield Armory 1911. It is a .45 caliber handgun and has, ostensibly, a single purpose: to allow one human being to kill another. On the other hand, there are aesthetic choices being made that, all other things being equal, draw me to this particular model, over all the others. Granted, those materials, textures and finishes; the small details like the holes in the trigger and the skeletonized hammer; the grips cut into the frame at the front and the back; these things were all chosen for practical reasons, and while Springfield didn't set out to create a thing of beauty, they certainly had an eye on aesthetics, and the end result is one handsome looking weapon. Is it art? No, but I can look at all the 1911s on the market, and choose this one, because it is pleasing to look at.
On a related, and on topic tangent: there are people who shoot competitively, and their handguns are setup specifically for that purpose. In this sense, those handguns are being used in what is essentially a game.
It's also interesting that at no time during the discussion about what art is or is not, that Exit Through the Gift Shop never came up. Granted, that could make for a whole episode on its own.
On a semantic note, I dislike the arguments that go "Are _______ art?". This implies that everything that could be defined as ______, is or is not art. I would posit that the question should be "Can _______ be art?". Is every intentional attempt to apply paint to a canvas art? I would argue that they are not. Certainly with sufficient skill a great many such attempts can be art, but not all of them. So can video games be art?
Regarding the interactivity of art: Without the human element of a player, a video game will just sit there. Maybe there is a cut-scene when you hit "start," but after that whatever purpose that game has, it cannot fulfill that purpose without a player. To add a wrinkle, even your "traditional" forms of art (film, paintings, sculptures, etc.), require a human to view them in order to fulfill their purpose. So art has always been interactive, it's just that with video games, that interactivity goes both ways; the game shapes how the player plays, which shapes the game, which shapes how the player plays, etc. It's the same as how a series of pictures can become a movie, or the cycle of art imitating life imitating art imitating life. Video games simply take these kinds of cycles and put them into a personal experience.
Getting back to the question of "can video games be art?", I would say yes, they can.
Edit:
By the same token that I enjoy the design of that 1911, I enjoy listening to these episodes. I listen to educate myself, to grow as an artist and a person, but also because it's fun. The conversation is lively, intelligent, intelectual...and it's damn entertaining too. On a more personal note, I don't have the opportunity to have these types of conversations with a group of people terribly often, so the whole "friends in your head" aspect is there as well; probably more so in my case, since I consider many of the panelist friends in reality, and these shows allow me to hang out with them vicariously.