Just another data point.
iTunes was in the middle of playing a song streaming from my iCloud library when the song suddenly quit, the iCloud icon went away, and all the songs available from iCloud disappeared from the list.
This time when I went to Preferences to check "Show iTunes in the Cloud purchases", the option wasn't there. To resolve this, I had to completely logout of iTunes/iCloud and then log back in. This made the option available again.