I use two libraries, but will be adding a third soon. I burn each of my CDs twice - once for my "main" library, which is matched by iTunes Match so that I can use it on my iPhone and iPad. My main library also contains music I've downloaded from other free/paid sources (all legal FWIW). The CD burns are in AAC format. This library also resides on an older 80GB iPod Classic for my internet-free music fix!
I have a "lossless" library for my ALAC files, which contains the high-quality burns of all of my CDs. iTunes seems to know to not "match" this library, FYI - and shows my "matched" music from my "main" library as "in the Cloud" and ready to be downloaded if I wish. Nice, that.
The third library, which I haven't created yet, will be of all of my DRM-free "matched" music - music I've bought from the iTS/MS/Amazon catalogs.
FWIW, I do run Windows in a Parallels VM. MS has a "Music Deals" app that isn't part of their standard install - I think I scored 70+ CDs of free "albums" (out of the 100 available over the Thanksgiving to Christmas time period) in HQ MP3 format including some current and top sellers from the Allman Brothers to Zedd (my lame "A to Z" reference..."). Then I added them to my iTunes account so I didn't have to pay for their XBox subscription - so they're in two clouds now.