For all those that wanted it ..... The feature has now been added in iTunes 10.5 released yesterday. I copied this from another thread.
Here is the thread.
https://discussions.apple.com/thread/3108471
This is now possible in iTunes 10.5. Here's how you do it:
1. Upgrade your version of iTunes to 10.5 (released October 11, 2011).
2. Click on iTunes Store in the lefthand column of iTunes and log in to your account.
3. Find "Purchased" in the Quick Links menu on the right hand side of the Store home page. Click on it.
4. You should see a list of your downloaded apps on the screen. Mouse over any app that you wish to delete. A small "x" in a round circle will appear in the top left corner of the app icon. Click the "x".
5. A notification will pop up telling you that your purchased app will now be hidden and how you can un-hide it in the future. Click OK. The app will disappear from your purchase history in iTunes and all associated iOS devices instantly. Verify this on your iOS device by navigating to your purchase history in the App Store.
Enjoy, and thanks Apple for listening to your customers!
Hide to your heart's contents.