Well, not to defend Paris Hilton -- since, er, I find her annoying whenever I roll through something she's in -- but as JD-jazzy-Dyal said, has anybody but me actually seen her in something? Now, I saw her live (as a cameo guest on SNL), and she was still "acting" like herself, so that's not an indication (although as I said, she was bad, in kind of a faux-"I'm showing you that I'm assured and in control of the situation" kind of way, where you could tell that she thought she was far cooler than she actually was). She could do an incredibly rockin' Lady Macbeth, for all I know.
I don't believe that to be the case, and I'm not a fan of her personally, but it's not inconceivable. I haven't seen her in anything where she wasn't playing herself (or a herself knock-off), and I personally haven't seen her in anything that wasn't shot in one take. A good director can make mediocre actors look good with enough takes. You can often tell the mediocre actors from the great ones by looking at which actors can change emotion or deliver an impassioned dialogue without the director having to go to a different camera shot (and thus, go to a different take, give them time to get into their new emotion, etc).
And frankly, she's tall, thin, and expensive-looking enough to make a pretty good aristocratic elf wizardess or something (provided that she can in fact act).