Why do I have to download the image just to view the picture/video?

Probably, I guess, you are trying to view image under iMessages. (Though you have not mentioned explicitly)

The images are stored on iCloud based on your settings. If you have Settings > [Tap you Name] > iCloud > Messages [Enabled]

This stores all your attachments on iCloud.

Because it's not on your phone and has to be put there for you to see it?