iCloud Confusion

So, I've just about linked up my iPod with my new Windows laptop (and thus downloaded the new iTunes complete with iCloud). I'm a bit confused as to why my libraries don't seem to be matching up - the 'On This iPod' tab shows all of the songs and playlists I have on the iPod, but these aren't coming up in my library, meaning that I can't edit these playlists or songs anymore. I've also purchased a song, which is in the library, but not on my iPod (even though I've selected the option to add it to the device). I don't really want to pay for iTunes Match if I don't have to, so is my only option to manually add my CDs to the library again, or will this even solve the problem?

Very confused, would appreciate any help!