Function does not remove the quality of being art from a creative work. What is art is very much in the eye of the beholder, and in the final analysis, what is art is what we call art. (sounds pretty circular, I know

).
The idea that a creative work can only be art if it exists only for the sake of some ephemeral criteria of non functionality is pretty elitist, and is a limiting definition of the word.
Just to give as an example, here are two of the dictionary definitions of the word 'art'
art
n
1: the products of human creativity; works of art collectively [syn: fine art]
2: the creation of beautiful or significant things; "he was a patron of art" [syn: artistic creation, artistic production]
3: the superior ability that is attained by study and practice and observation; "he had mastered the art of a great craftsman" [syn: artistry, prowess, superior skill]
4: photographs or other visual representations in a printed publication [syn: artwork, graphics, nontextual matter]
Source: WordNet ® 1.6, © 1997 Princeton University
art
n.
Human effort to imitate, supplement, alter, or counteract the work of nature.
The conscious production or arrangement of sounds, colors, forms, movements, or other elements in a manner that affects the sense of beauty, specifically the production of the beautiful in a graphic or plastic medium.
The study of these activities.
The product of these activities; human works of beauty considered as a group.
High quality of conception or execution, as found in works of beauty; aesthetic value.
A field or category of art, such as music, ballet, or literature.
A nonscientific branch of learning; one of the liberal arts.
A system of principles and methods employed in the performance of a set of activities: the art of building.
A trade or craft that applies such a system of principles and methods: the art of the lexicographer.
Skill that is attained by study, practice, or observation: the art of the baker; the blacksmith's art.
Skill arising from the exercise of intuitive faculties: “Self-criticism is an art not many are qualified to practice” (Joyce Carol Oates).
There are of course, those who claim that the dictionary definition doesn't apply because it doesn't appeal to their inner aesthete, but that misses the point. In the simplest (and best) definition, art is the expression of creativity in any medium or context.