"Music Available Offline" is On but it doesn't make any difference. An ideas?

Thanks for the articles. They are a good overview of how it all works but none of them address the particular issue I raised which was:

"... there is an option at the bottom that says "Music Available Offline - Only show music stored on this iPod touch" and a toggle switch for on/off. It doesn't matter whether I have this on or off I always have my entire music library (locally stored and on iCloud) displayed."

So if I have 6 albums on my iPod and 2 have been downloaded to the device and the other 4 are only playable when I have a wi-fi connection and can stream them from iCloud, by toggling that switch "on" I would expect those 4 albums to disappear from the view so only the 2 albums downloaded directly onto my iPod remain on view. Toggling back to "off" those 4 albums would reappear so I have 6 albums in my collection again. That's what I would expect to happen. What actually happens is nothing. On either view I always have all 6 albums, it's just that when I have no wi-fi connection those songs that need to be streamed just don't play. But they are always showing which renders this feature useless unless either a) I am doing something wrong or b) it is a bug/glitch in the software.