Apple TV streaming iTunes Match?

Okay, so iTunes Match tunes in the cloud works great on the ATV2.... which has a very small SSD, acting as a cache, correct?
So, the cloud must be streaming right? I mean, it's obviously not filling up my harddrive on the ATV, so it must be streaming. Why can't the same be done for the iPhone as well? I assume this will eventually be a setting added to an iOS update at some point?
I can imagine a setting that lets you have songs downloaded from the cloud removed after playing them, or maybe removed after a certain time? Of course, you could still keep the download too, as the default setting if you wish. This would be the best of both worlds - streaming and storage depending on your needs/wants.

Working fine on my system. Can you provide more info on what is happening? Is there an error message?

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