I think it depends just what you mean by "the church". If you take a church that follows the prosperity-style teachings of someone like Joel Osteen it sometimes looks more as if it's the world that's got a little bit of church floating around in it. Jesus becomes little more than a cosmic provider of all the things we can dream of to "claim by faith", presumably with a full money-back-guarantee if you come to believe that Your Best Life isn't Now but was before you got caught up in the drivel. The "Kingdom Now", "guaranteed healing" teachings of Bill Johnson and his ilk don't fare much better. There it seems like Jesus is little more than the cosmic surgeon who conveniently banishes illness (assuming we have enough faith, naturally), because since sickness doesn't exist in heaven it shouldn't exist on earth either, apparently. Death and sorrow don't exist in heaven either but for some reason they get a free pass to exist on earth. Outside of the kind of high profile churches that seem to exist as much as theological target practice as anything else, it's reasonable to assume that a church made up of imperfect people will itself be imperfect. We all have our struggles and sometimes we stumble and fall, which can only happen if "the church" is at least somewhat polluted by "the world". An analogy to the concept of "in the world but not of the world" that I like is that of a boat in the ocean. The boat is in the water but the water isn't supposed to be in the boat. Thankfully the boat doesn't sink just because a bit of water got inside - it takes a lot of water inside the boat to sink it. The warning that "a little leaven leavens the lump", applied to the analogy, could suggest that just because a little water won't necesarily sink the boat we shouldn't be complacent about water getting in - a splash of water won't sink it but a splash here and a splash there add up over time. If we keep thinking "it's just a splash" it's more likely we won't regard it as a problem, not worry about confession and forgiveness (which in the analogy might be like running the pumps to get the water out), until suddenly we come to realise the boat is sinking even though the pumps are running overtime. If we've got "just a small leak" that's letting in water we still need to fix it (again, a comparison to confession/repentance) or even that small leak will eventually let in enough water to cause problems.
What Tango said. Nicely put. A bit further, perhaps. Jesus himself warned about those that proclaim righteousness (Lord, we cast out devils in your name) but whom in fact had no relationship with God. Paul constantly warned his baby believers and even long established churches to beware. No need to warn if there was no possibility of error creeping in.
As seen in Revelation, a variety of "local" churches, witnessed by the world, feature differing strengths and failings. The true, singular church occupies many localities and partakes, by association, with varying testimonies. I think what the world sees today as the church is very dismal, while many local assemblies harbor tremendous strengths and separation from the world.
I would go further to say also, in followup to Iminxtc's comment, that if we view the "church" as the "local congregation" from a U.S. context, we may get a very different view than if viewed from a different context. Further, "size" or "growth" or "programming" is a poor indicator of health or purity.
If there were an option, I'd pick an unqualified, unexcused, and most emphatic YES There's nothing in this world that isn't tainted. Are the people within the church unpolluted? A laughable question as some of the biggest evidence against Christianity is a cursory look at 99.9% of Christians. So has the institution remained unsullied despite its constituents? Most protestants at least have the good graces not to boast of institutional infallibility. I can't listen to Catholic argument for infallibility. When you stand back and just watch the misery of this world, its impossible to even imagine something unpolluted.
It is weird I didn't give that as an option. It must have been late. Thanks for pointing that out hisleast.
The church are the called out ones. Ek from Ekklesia means "out" and the rest of the word is "called". We are in the world and not of. Its more that people don't have a Christian world view that makes sense.