Q: If I buy iTunes Match, can I use it as a backup? Better yet can I just delete all my music and rely on iTunes Match?
A: No. Seriously you can't. What is in the cloud via iTunes Match is NOT a copy of your music library and it probably never will be. Apple has never advertised iTunes Match as a backup service. They are under no obligation to continue the service. They could easily scuttle the whole thing after a year, and your less-than-exact "backup" would just disappear.
Now to that phrase, "less than exact."
• iTunes Match is a mix of music copied from your hard drive and uploaded to the cloud and music for sale in the iTunes store that iTunes Match has identified as being the same songs as what you own. Putting aside for a moment the fact that iTunes Match often mis-matches what you own, there are often major differences in quality and playback volume between matched tracks and those that are uploaded. It is common for iTunes Match to upload some tracks of an album and match others, so this difference in quality may be apparent to you.
* iTunes Match does not upload lossless file formats. It does "support" certain lossless formats, but it does so by creating a 256 AAC file and uploading that temp file to the cloud. Even if a lossless track gets matched, the copy available to you in the cloud is 256 AAC, so any sonic benefit you gain from your original lossless file is, well, lost.
• iTunes Match incorrectly identifies some types of AAC files created outside of iTunes as "eligible" and if the file needs to be uploaded, will do so. However, these files apparently are corrupted in some way and will neither play back from the cloud, nor play back if downloaded.
• iTunes Match currently replaces some explicit content with "clean" versions. There are even reports of instances where the explicit track will play from the cloud, but if an attempt is made to download a copy, the user gets the clean version.
• iTunes Match occasionally will match an album-length track with a shorter version.
• If you have mono versions of some music, it may be matched with stereo versions. The Beatles' mono issues are a prime example of this.
Get yourself an external hard drive. Make a backup of ALL of your files, not just your music. You owe it to yourself to do so. If you don't eventually you will lose everything and have no way to get it back.