Isn't this exactly how it was in the last version? A link/button to "show only music on my phone"? That was perfectly fine, and you only had to click it once, ever, for iTunes to behave as expected and show only songs/albums you actually had on the device. I DON'T want to see my entire library, which is 10x bigger than what I keep synced -- it's a huge pain to scroll through, and doubly so now that two thirds of the artist icons are Pastel Rainbow Microphone. Plus, it's not even showing the whole library (e.g. it lists ten artists starting with A, though my phone sync only has 6 and my full library has twenty-four). And even if it did show my completely library, for anyone who doesn't have unlimited data on their service plan, or who lives in a place with a lot of neighborhoods where service is sh*tty or nonexistent, expecting to stream all your music is NOT A VIABLE OPTION.
Also, limiting to "Downloaded Music" does indeed get you "showing only music on this phone" -- but it also only displays "recently added" items . . . which is only about a third of what's actually on the device.
This is a small thing, seemingly, but in practice it's a massive annoyance. I LIVE with my phone's music, and making it this hard to access is absolute garbage. I'm way overdue for an upgrade, and for the first time in ten years I'm actually considering leaving the entire Apple ecosystem behind.