Same problem as described by xxChosen1xx. I haven't read further down the thread so pardon me if this behaviour/fix has been mentioned.
I have some tracks which play perfectly on itunes and other media players, and have Matched status in itunes.
Matched downloads in iPhone cut off abruptly usually two thirds into the song. If the next song is not downloaded yet, it will be blank for the remainder of the track.
If the next song has already been downloaded, the next song starts playing immediately on this same track. Thus the cut and splice behaviour some reported.
However the key behaviour I haven't seen anyone mention is that if the song is 4:00min and gets cut off at 3:00 and the next spliced song starts playing, pressing Next Track at, say 3:30 the track will jump direct to 0:30 of the next song and the playback is GAPLESS.
Which leads me to think there is some problem with the way the iPhone deciphers gapless playback from songs downloaded from Match.
If you delete your album from itunes and re-add wholesale, the problem will still be there even if you have replaced your version with matched copies. To fix this I had to add each song one after another only after each status has changed to Matched. Total pain.
Another way I did not try is to change the Gapless information on the album info in itunes BEFORE deleting and re-adding these same files. I would try it if I come across another album with this problem.