Paperwhite 2 with the November Update:
(I have a PW1 so am extrapolating from that and incorporating reports here

- Cloud and Device are disjoint lists, unlike iOS, the Fire and Android apps. So to add an item to a collection you have to go to one or the other list first.
- long tap menu includes Add to Collection option which brings a selector to pick from available collections, or create a new one using a menu option
- only Books, Docs, and (FWIW) Active Content can be put into collections (no periodicals)
- collections appear in Recent/Title/Author sort as well as Collections view (unless you are just showing Periodicals). items not in Collections appear in Collections view.
- when you open a Collection, you can sort by Recent/Author/Title, and you can choose Cover or List display.
- long tap on a Collection Item or, when a collection is open via the menu, you can rename, delete, or add/remove items
- when adding/removing items you can use sorting and Go To to find the things you want to add or remove (same as on normal home screen views)
Critique:
There is almost nothing that’s better about the PW2 implementation in terms of managing Cloud Collections.
- BUG: you cannot do any collection editing offline without getting nagged about it. This doesn’t happen with the other implementations. It is unnecessary and unhelpful: if you never turn on wireless it should just do what you want it to do.
- BUG: if you deregister and reregister, side loaded books that were in collections forget what collection they were in.
- USABILITY ISSUE: it would be really nice to filter a collection view to show only what is on the device, to replicate the pre-cloud implementation. For collections with large memberships, it is difficult to navigate that list on eink devices (not as much of an issue on tablets). But note: you can adjust sort order and use Go To (tap on page status in lower right corner) to find it more quickly than page page page page. You are forgiven if you never discovered this feature.
- USABILITY ISSUE: Collections appear in every Home screen view, whether they contain on device items or not. This creates clutter (but the historic implementation did too, which is one reason I never used them). This is not an issue for the tablet apps because items and collections are never shown in the same list.
- if you have a Custom sort order as established with one of the other implementations you will not see it here.
I’m probably missing some issues here, but as I said, this is all second hand info for me until (as I'm hoping it will) it arrives as an update for PW1.
Next up: Summary