This issue drove me nuts because I hate clutter but I had to adapt to having a messy library and 'I'm reading' list. I have also adapted to the list displaying that I am in the middle of the books no matter how many times I have paged through to 'finish' both on the website library and the reader.
Now I just read and ignore the mess since Kobo has said they are aware and simply suggested deleting and undeleting.
If you don't undelete in time and the book disappears you can go into the book store and click 'add book to my library' to get it back if you want it to show in your library.
It will always be in the purchased page.