Bit of an update. I decided, for the sake of science essentially, to reformat and add my iTunes Library again. I want to point out that this library was entirely encoded and downloaded in 10.7.4 with iTunes 10.6.3. This time around, following Apple's guidelines for adding an iTunes Library to a new and/or reformated mac...actually worked. I listened to the last 3 seconds of each song (Protected & Purchased AAC's only) proving that none of them skipped ahead. Here's what I have figured out...
Clearly every now and then, say every third update to iTunes....to totally start over. I think a lot of things encoded in much older versions of iTunes don't mesh well with newer versions of the application. That doesn't so much mean re-downloading purchases and re-importing your CD's. I think "importing" them via the File menu "Add to Library" option as a batch (All the songs in one folder and not in subfolders) will be sufficient.
So basically every couple of updates I am going to back-up my iTunes Folder. Take ALL of the songs and place them into one folder. Then import all of them after wiping iTunes. The software SHOULD reassemble everything inside your new iTunes Folder. And I believe it will the gapless playback analyzation.
I view this entirely as an iTunes software problem. Files don't really go bad unless an application has done something to them. Given the fact that audio files now have multiple things that can be edited (Band name, genre, composer, etc, etc) there obviously is a high risk of corruption. What I find amusing is I cannot find any literature anywhere, anyone having this problem with MPEG-3, only MPEG-4. Curious note. But I think it's iTunes fault.
As for the things iTunes Match is giving you access to so you don't have to always import your CD's. I think that's honestly strictly a series of clustermucks on Apple's side and not in iTunes. In my earlier post I stated that some songs if you purchased them and then re-download them will show up coming from another album. It'll be the same artist, but it'll be another album which also features that particular song. So there is obviously some crosschecking problems that Apple should remedy. Yes, it's nice to be able to still get the song if you lose, but let's maintain some continuity.
This is also the first time ever that I have had purchased music "Not On This Computer" show up telling me all of my purchased music has been downloaded. But...if I change one space in one album it tells me I haven't downloaded that album. Again. Apple needs to work on their side of things.
I've come to two conclussions.
1. Drag N Drop ain't a good idea. Ever. Importing them via the Import feature is the safest way to do it. If it takes an hour or two, so be it.
2. There are several fixes for these problems for both iTunes Match and Purchased/Protected Music cutting out.
And...Apple needs to fix this. iTunes has reached the end of it's lifespan. Too much under the hood means too much can go wrong.