Some things work well. They are useful, or "utilitarian." Some things look nice, even beautiful. Things that are added to a design that do not make it work better but make it look nicer are decorations; they are decorative.
Creative people debate the nature of good design. A common area of debate is the relative importance of usefulness and visual beauty. "Utilitarianism" is the idea that one should avoid decoration completely. If you design something to work as well as possible, it will automatically be beautiful.
Without reading more, I don't know what is meant by "the art-craft-design dilemma." I suppose it means the issue of labelling things and creative processes as "art," "craft," or "design."
It is been traditional for centuries to decorate buildings in various ways. The "modernist" architects such as Le Corbusier and Mies van der Rohe claimed that "form follows function," and did their best to build completely utilitarian, functional structures--big, glass, rectangular blocks without any hints of the sculptural details other building had always had. That would be an example of "utilitarianism."
In the world of computers, there is a debate as to whether coding is "software engineering" or, in the words of Donald Knuth's books, "The Art of Computer Programming." Is it engineering (craft) or art?