Does really Apple want to keep 5 version of Matchbox?!
Apple probably doesn't care in this department. Encoding works in such a manner that your 96kpbs (for example) version is most likely identical to someone else's. In the grand scheme of things, if they keep 5 versions of that song for 1,000 people, they're just fine on storage.
Why some matching doesn't occur has to do with the waveform of the file. If it doesn't match well, iTM won't match them up. This is a technical issue that Apple either (1) needs to fix or (2) has decided works for their purposes. It's admittedly frustrating from the user's end, but Apple can (failry) say "Just rip it in 256kbps and we promise to store that file on our servers. It's the same as if we had supplied it to you." If it's a case where a user doesn't have the CD anymore, Apple can (again, fairly) say "you don't have a license to play the song, so we're under no obligation to provide you with a match. In fact, we're being generous here." (And they'd be right).
My experience is that ripped songs match with far less precision that songs purchased from, say, Amazon. This makes sense, as the recording labels supply all the vendors with the same song. Ripping gets a little fuzzier, since you could borrow a friend's CD, rip it (which is illegal), upload it, match it, then have a "legit" copy. Apple's following the law far closer than most users, so these behaviors are expected. Those who own their music legally suffer a bit, but it's illegal users who deserve the scrutiny, not Apple. The notion that iTM could "launder" songs was one that I'm sure didn't please the recording labels.
This is why I don't like it and this is why I will not renew a second time my iTunesMatch: there is no reason I pay $ 27 for this (I'm Canadian..and even if our dollars were at the same value we pay $ 2 more just because.... ).
You've got a fair point here, and it remains to be seen how successful iTM will be. For my $25 a year, having a copy in the cloud is well worth it. That said, I'd like to see a higher matching rate of my ripped CDs, so I'm certainly in agreement here. As for "hiding" vs "deleting," I see that as a red herring. If the problem is that a user can't delete a song, and then force a rematch, I'm a bit more sympathetic. If the problem is simply "I dislike 'hide' and prefer 'delete'" (when hiding is what's actually been happening all along), then it's a somewhat pendatic concern.