Comment 5 for bug 934206

I was seeing the same issue. I also wasn't able to alter my library listing to exclude the duplicate UbuntuOne purchased music, I did, however, find a workaround for now. I did the following:

NOTE: Save you podcast locations as the following may wipe out their locations.

1. Opened Rhythmbox.
2. Went to Edit -> Plugins
3. I disabled the "Ubuntu One" plugin.
4. Went to Edit -> Preferences
5. Changed my library location to only be my main local music folder.
6. Created a symlink to the purchased music folder in my music folder: ln -s ../.ubuntuone/Purchased\ from\ Ubuntu\ One/ ~/Music/UbuntuOne
7. Close Rhythmbox
8. Went into ~/.local/share/rhythmbox
9. Removed the following files: playlists.xml, podcast-timestamp, rhythmdb.xml
10. Logged out of my user.
11. Logged back in.
12. Restarted Rhythmbox.

I no longer have duplicates. So was I figure is happening is the following. The "Ubuntu One" plugin has a bug causing it to list purchased music twice. This plugin also prevents you from changing your library location (even through dconf editor). Unfortunately, I haven't found a way to get Rhythmbox to clean up its index onces the duplicates are in there. That is why it is needed to delete those files in step nine.

I am guessing none of this will be much of an issue once they fix that plugin.