The remote still works, until another command is sent from the Arduino, at which point it defaults to the programming again. It would be easy to put the Arduino inline between the receiver and light fixture if you don't mind cutting the factory wires to the receiver, allowing you to hide the controller and still have the receiver exposed. The Arduino outputs 5V on this channel, so you'd just have to make sure 5V is what the fixture needs. I'm pretty sure most PWM signals are 5V, so it should be good.
Yeah, that's kind of the direction I was thinking of going with it in order to get everything out of sight. You'd still have the wire to hide though. Did you see this RTC kit?