Interestingly enough "Location is on this computer" appears to mean absolutely nothing. It still shows episodes that have the cloud icon. To get JUST the ones I've downloaded, I have to also include "Location is not iCloud." Apple's interpretation of either "location" or "this computer" (or both) is not in sync with mine.
I've been using iTunes for podcasting since 2006, when I got my first iPod. Apple has redefined how they think we SHOULD be listening several times, but I'll tell you what I do and what a "saved" episode seems to mean to Apple.
I download everything to my laptop, because I don't like depending on the cloud, and the way the podcast app works isn't compatible with how I listen to podcasts (i.e., listening to all episodes in order, so if I subscribe to a new podcast and episodes go back two years, I download all 2 years and listen to them in order, using smart playlists).
So as far as I can TELL, a "saved" episode means that you have downloaded it, but even after you listen to it, and even IF you have "delete after listening" set for that or all podcasts, it never deletes that episode, and it will stay on your hard drive forever.
I have a few like that (such as an episode of The Roundtable Podcast that I was on). But the problem I'm trying to get around and what caused me to post this question is that, apparently, there is some way to set episodes to be saved without being aware you've done it, unintentionally. So I suddenly discovered a bunch of saved episodes. I was hoping there was a quick and dirty way to find them all and kill the ones I don't want to save without going through all the episodes of all the podcasts I subscribe to.
If I intentionally save one, I'll probably end up doing the "love" workaround that you suggest. That seems like it would work.