Is "pretty ugly" an oxymoron?

It depends

I'm late to the party so not sure if anyone will see this, but the existing answers are rather incomplete. "Oxymoron" is not a philosophical or logical term of art;¹ it's a rhetorical one.

Thus saith the OED:

1. Rhetoric. A pair of opposed or markedly contradictory terms placed in conjunction for emphasis.

2. Any contradiction in terms.

The second is metaphorical and irrelevant—the examples given are "the hardworking loafer that is the colonial Dutchman" (1902), "healthful Mexican food" (1989), and "affordable caviar" (1993)—but the first, the word's original sense going back to its first attestation in Servius, is concerned with intent and effect, not logical reasoning.

Of course, "pretty" and "ugly" are usually opposites and, of course, the adverbial sense of "pretty" is a clipping of "prettily" derived from an older sense of "pretty" as intending "cunningly, skillfully, or ably done".

Again, though, it's a rhetorical term: what matters is intent and effect. For a middle school kid, who says it while giggling at its absurdity, to an audience of middle-school kids, who likewise giggle at its absurdity, it's absolutely an oxymoron. For serious writers, skillful and careful about their word choice, like David Foster Wallace in Broom of the System, it's an oxymoron as well. It's an oxymoron as the title of a book on fashion. It's an oxymoron as the title of a biography of a girl with low self-esteem. It's an oxymoron as the title of a book on oxymorons.

But going back to the giggling middle schoolers, the posters at StackExchange are very largely from the group of students who wanted the teacher to know how much smarter we were than the other kids. Stuff like this, where a common belief is turned on its ear, is catnip for us.

So while, yes, "pretty ugly" isn't an oxymoron when said quickly, unthinkingly, and without any intention or effect apart from specifying "not really ugly but not really good looking, either", oxymoron doesn't actually mean paradox² and shouldn't be analyzed as though it does.

_{¹ That said, Wikipedia being what it is, "oxymoron" is part of its "index of logic articles".}

_{² Obviously, that's for the technical logical sense of paradox that OP and the other posters were applying when stating "pretty ugly" could never be an oxymoron based on its semantic content. Informally, people sometimes treat them as synonyms, although one is a logical concept and the other a rhetorical device.}

No, they are not oxymorons. Oxymorons contain words that have mutually exclusive meanings. Here's a fair description of this.

In your example. "pretty" and "ugly" do not have opposite meanings. The meaning of "pretty" in this sentence is "somewhat". The meaning of "ugly" is "unattractive". "Somewhat" and "unattractive" are perfectly compatible.

Edit (added 30 July 2015):

However, the entry at dictionary.reference.com/browse/oxymoron gives a strict definition involving actual contradiction in meaning (which was the basis I was working on), but then also gives an "in Culture" definition based on apparent contradiction. "Pretty ugly" appears to fall into the second of these categories even if not the first.

As "pretty ugly" is a variant for "rather ugly" there is no cause to see it as the literary artistic device of an oxymoron. "pretty ugly" does not mean she is pretty and ugly as well. The meaning is "very/rather ugly".