After further investigation..
To make this easy to explain imagine each iCloud Status is given a number.
Matched = 0
Purchased = 1
Uploaded = 2
Apple Music = 3
Ineligible = 4
Local Only = 5
Error = 6
Duplicate = 7
So when you create a smart playlist you're saying include all songs where status=3 for Apple Music.
Now the problem occurs because Apple incorrectly updated these values in the Smart Playlist dialog.
The correct status code for Apple Music is actually 7 as it was added last.
Meaning the actual status code layout is:
Matched = 0
Purchased = 1
Uploaded = 2
Ineligible = 3
Local Only = 4
Error = 5
Duplicate = 6
Apple Music = 7
Meaning status code 3 onwards are messed up.
Ergo:
Matched=Matched
Purchased=Purchased
Uploaded=Uploaded
Ineligible=Local Only
Local Only=Error
Error=Duplicate
Duplicate=Apple Music
So a workaround is to use these. If you want to create a playlist with all songs that are Apple Music then select Duplicate.