1. You need to be honest and I would suggest apologizing.
2. As HealingMe4Me said, fantasizing about someone else is not big deal, it's just a fantasy. For example, there's no reason to be worried about her going to work because she read 50 Shades of Gray.
3. There is a correlation between violence and sexual arousal (not a causation, just correlation). Ergo, she's interested in seeing you in martial arts because of that correlation.

Finally, I think that last one is really important. She want's you to join her in that class and that means, ultimately, that she's choosing you to be with.