I too have heard that recent updates more or less fixed the nagging problems encountered in the early days of Cloud Collections.
But it sure made a heck of a lot of noise when Cloud Collections first came out and infuriated pretty nearly everyone.
At no point have you ever NOT been able to create collections at all while offline. You might not have wanted to, what with the mentally retarded nagging, but you were still *able* to.
And whether you really want to manage collections one book at a time, when older firmware allowed you to use an easy hack to manage with calibre, is questionable. My old Kindle Touch works fine (no updates here
) but these days, any heavy user of collections might just want to get a Kobo instead.