I definitely believe that Fashion can be Art. And whether or not it *is* art is largely in the eye of the beholder. Art critics are there to assist us with interpretation of art, but they don't have the final word on whether something is "art" or not.
I recognize that giving the power to determine if something is "art" solely to the person who sees and interprets and/or appreciates the work has it's limitations. If a masterpiece is completed by the artist and left in an attic for decades, does it only become "art" once someone finds it? Is it "not art" one second, then becomes "art" the next? I'm not so sure about that. I have to believe that the intention of the artist counts for something, but that the artist's intention is only part of what determines whether or not something can be considered art.
As for whether or not what we do when we put our outfits together can be considered "art" or "craft", I don't know. It is definitely self expression, and could be considered "art" or "craft" depending on how innovative you are (art?) or how well you have honed your instincts to choose the clothing elements needed to do the job, whether that job is self expression or just looking appropriate for the occasion (craft?).