It's a part that replaces a freeze plug in the block. It has a heater coil attached that goes down inside the water jacket of the block.
As far as the AC, if you turn it on and the clutch doesn't engage it could just mean the coolant leaked out of the system. The pressure switch won't allow the clutch to run with an empty system.
The part of the AC you showed in the pic. On my 90 there's a bent piece of metal over the hole. All it does though is keep the crap from shooting straight out and hitting someone.