To add to what Josieb1 said:
You have hit upon the reason why so many here hate Cloud Collections. It does not appear to have been well-thought-out.
You can downgrade any Kindle to any firmware that was released
for that Kindle. The PW2 is last Kindle released without Cloud Collections, so you can downgrade to fw5.4.0 and get rid of them.
However, that was the first firmware version the PW2 shipped with, and no official update was released. You will hav to jailbreak, enable SSH in the diags partition, reboot in diags mode and overwrite the main partition with the new firmware.
This is complex and you do NOT want to mess it up. If you feel comfortable trying it (you can ask for step-by-step guidance), direction are here:
http://ixtab.tk/kindle-touch-images/PW2/
There is a readme file, and folders containing the partition images.