I just read this article on the role artists play in urban regeneration. No room to move is a pretty apt title, as it's basically a long list of the pitfalls that public and community engaged art projects face, and it doesn't leave you with much hope other than "it's difficult to know what to do in our current climate". Although it's disheartening, it's also good to be aware of these issues so that at the very least we aren't unknowingly aiding the marginalization of a group of people (maybe even ourselves). If anyone else reads this I'd like to hear your thoughts.
Also, Miwon Kwon's "One Place After Another" is another very critical view of site-specific art that really challenged my thinking about public art. Grant Kester's "Conversation Pieces" is a more positive take on it (and they riff on each other, which is kind of fun). They're all good, if and when you have the time.