I have taken a computer art course before. I have a masters in fine art (painting) and I have been a software developer for more than 15 years, so I have some familiarity with artists and technology. Here are some of my thoughts.
I suspect you will get a mixed bag of technical (computer) skills. You should be prepared for some very novice level individuals. My first suggestion is to try to come up with collaborative projects. Then techincally sophisticated can group with the less sophisticated. They can learn from each other. You should suggest that technically savvy students team up with beginners. You might ask some questions to help people decide what group they are in and give you a sense of where the group is as whole.
The projects should be very open ended. You might want to offer a choice of projects at each step. The ability to be creative with projects will be a great motivator. From what I have seen, many creative people find tightly defined assignments and work constraining and demotivating. Conversly they will invest extra energy and effort if they can and explore and shape the result. Just like the posts above, the individual students probably have very different ideas about what the course will be teaching. They also probably know what they themselves are interested in pursuing. Provide them avenues for exploring what the want with flexible projects.
Do teach them as much about structure and rules as you can. Students will need to learn the basic of game design. Teach them everything you know in a structed and simple manner. Creative people will have no trouble pushing the boundaries. However, they need a framework to build on. For example, maybe they are interested in a game in which decision alter the properties and capabilities of the character. They would need a strong backing in more traditional game mechanics to have any hope of pulling off a self evolving game. Maybe they just want to work on some novel visual style. Then they would need some kind of basic gameplay to make an integrated result.
For tools, use those that hold you by the hand the most. Anything you can do to help them produce something fun, especially at the beginning of the course would be great. I am not familiar with this area so I don't have any specific suggestions. Flash or similar is not a such a bad idea. Something that can start with animating simple shapes and then move into some of the concepts of develpment might work. I am assuming that by fine arts students you mean visual arts. If not, starting with graphical tools would not be such a good idea.