Biblical perspective on Christian involvement with the fine arts

Is there any legitimate place for the arts within the biblical worldview, or is it simply a frivolous and "worldly" pursuit? How can we tell good and godly art from bad art? Our daughter is an art student at the university, and we're worried that she's just wasting her time and energy. More importantly, we have deep concerns about the moral aspects of what she's doing – her Life Drawing class regularly requires her to sketch the nude human figure from a live model! How do you feel about that?