Yes! I have made a few quilts with lots of ugly fabrics.
I was in an ugly fabric swap once and I thought a lot of what I got was really pretty. I made a quilt from that swap that I called "Who Let the Dogs Out?" I found when working with ugly fabrics that if I put a real lousy fabric next to a bright red fabric, you barely notice the ugly one!
I made this table toppe for my daughter with lots of old fabrics from her childhood. The 70s are known for ugly fabric. This little quilt is full of them. But they play well with newer prettier fabrics.
http://www.quiltingboard.com/t-118430-1.htm
I agree that beauty is in the eye of the beholder.