Yoda says, "And that is why you fail."
The question isn't, "Is anti-virus an application or a system function?" the question is "Why is an operating system so easy to infect that it requires us to have this conversation?"
Other operating systems don't seem to have this problem. There are millions of Unix web servers out there, millions of Macs and Linux PCs, yet somehow all it's always Windows that has thousands of active viruses.
There’s been plenty of Unix viruses in the world. No OS can ever be 100% secure from viruses, unless you made it so the user couldn’t do anything. Computers are just like buildings, any door that can be opened for legitimate means can be opened for illegitimate means, if the OS will let a user install and run software it will let them install and run malware. The only real question is how many secret processes an OS will let run, that’s really the danger point in Windows, there’s way too many times a Windows machine is running code from god knows where without the user having any idea or buy in.
Oh yes they do.