Yeah thats not local ... i Wanted to find out if they are being downloaded over the internet and iCloud does that only
You might have to sync once with iTunes to bring it out of this situation ... I believe the download got interrupted and now its not even trying but Photos app knows there are more photos pending ... hence the status
But after syncing my computer it looks like it put another set of each album on my phone. And it seems that the number of pictures in each album matches up. So even though it's stuck at "downloading" it's actually not trying to pull anything down