However, the third in them all is a variation of "Something requiring highly developed techniques and skills." That definition, though, seems uselessly broad.
So, I'd say that neither of us is wrong, exactly. We both are just ignoring the effects of context.
> Art museums are full of functional art including clothing, dishes, suits of armor, etc.
Absolutely, and as it should be. Art museums should have a greater breadth than just pure fine art. I would also add that pure fine art can, and very often does, incorporate elements of functional art.
To me, the dividing line is "is the art piece intended to be used for a practical purpose, or is it intended to be only experienced as art?" If the former, it's functional art. If the latter, it's fine art regardless of whether or not it could technically be used for a practical purpose.
My primary point, though, is that "fine art" has a technical meaning that is not synonymous with "better" or "real" art.