Yes It is part of the functional testing as well. For example when you are checking the functionality of any login function at the same time you should be checking if wrong user id password is getting declined or not.
If you really wish to have a set of good test case', sure that will include negative TC's. Also make sure that a person, even though not a tester, is able to perform testing and find out maximum bugs using your TC's. Negative scenarios are must in that perspective. [img]/images/graemlins/tongue.gif[/img]
I've done both, it depends on the application and the processes your company follows, breaking up Negative Test Cases on a web app years ago allowed us to focus on certain things that made the app better fault tolerant; something I don't think we would have had if we included it in Functional Testing. Currently, I work with a filter driver and its included in Functional Testing as the product does need to handle faults in a specific way, and that is part of its functionality.