A giant red aluminium lobster hangs where the chandelier used to be in the Salon de Mars. A trio of hoovers in a perspex box has pride of place before a portrait of Marie Antoinette. The Hall of Mirrors has a new addition: a round, petrol-blue convex reflector simply called Moon.

Kitsch arrived in Versailles this week in the form of a three-month show by the American sculptor Jeff Koons, and France cannot decide whether it is a brilliant artistic coup or sacrilege.

Seventeen garish creations by the 53-year-old New Yorker have been installed among the baroque splendour, in the palace's first exhibition of contemporary art. The curators' aim is to raise questions about the relationship between art, money and political power, and jolt tourists from their uncritical awe at Louis XIV's assembled riches.

But blow-up pink puppies, lurid hanging hearts and a ceramic statue of Michael Jackson with a chimpanzee are not obvious companions for Veronese, Titian and Bernini - and not everyone is amused.

A demonstration by about 80 mainly elderly protesters was staged at the opening of the exhibition on Thursday. A little-known traditionalist group called the National Union of French Writers described the show as "an affront to French culture It's like putting a false beard on the Mona Lisa."

Edouard de Royère, who heads the respected Foundation for French Heritage, said that he was not against contemporary art, "but I am shocked by its invasion of so magical a place as Versailles".

Clearly sensitive to the charge that he regards the show as a monumental joke, Koons - who was once married to an Italian porn star and is now the world's highest-paid artist - used the opening to stress his "enormous consideration for French culture and its influence on contemporary art".

And he said his art had more in common with the Sun King's baroque masterpieces than most people realised: "I believe that when placed next to symbols of the 17th and 18th centuries - the architecture, the decorative arts - my works find their place.

"I love everything that is baroque or close to the baroque, because baroque manifests the absolute power of creation. And for me, Versailles is that absolute power - the power of Louis XIV. He lived here, looked through these windows. Power was played out here."

In contrast to the public opinion, reaction among the arts establishment has been broadly positive, with critics revelling in outrage at the reactionary notion that the classical and the ultra-modern might be in some way incompatible.

In a glowing review in Le Monde newspaper, Philippe Dagen said there was an unmistakeable "sense of unity" between the ostentatious artefact of the Sun King's time and Koons's "luxurious trivia". Both were comments on their epochs, he said. "In Louis XIV's Versailles they used the codes of ancient mythology. Koons uses the codes of Hollywood, of advertising, of popular kitsch and consumerism."

However, one group of critics has chosen to look askance at what they see as an unhealthy conflict of interest linking Koons, the government-appointed president of the Versailles palace authority, Jean-Jacques Aillagon, and the billionaire businessman and modern art lover, François Pinault.

Aillagon - a former French culture minister - is a close confidante of Pinault, and in 2006 helped set up the latter's art museum at the Palazzo Grassi in Venice. Pinault is, in turn, one of the most important collectors of Koons's art - his acquisitions include a 12-metre flower-covered pony-dinosaur head called Split Rocker.

This monumental work - which requires 100,000 petals and £500,000 simply to install - now looms incongruously over the Versailles gardens as part of the exhibition, leading to speculation that Aillagon was leant on by his friend to include it.

Aillagon described as "wounding" the suggestion that the choice of exhibits was based on anything other than artistic grounds. But for some art critics, today's ultra-commercialised art market means that "philanthropists" have an interest in publicising their collections and lending them for shows.

"What we have in Versailles is less the staging of an exhibition with art as the determining factor, and more a financial manoeuvre - with speculation the motive force," wrote André Rouillé on the Parisart website.