There are many similar ideas to this going around but I think this is the easiest way to implement a sensible library management system within spotify, by making changes to the Library system's functionality. It's slightly different to other suggestions which is why I've posted as a new idea. Importantly, this needs to happen on the iPad app.
This idea would simply allow people to have a "traditional" record collection within Spotify which is what many, if not most users actually want. It is similar (but improved) to the Rdio "collection."
Functionality
Starring a song adds the artist and song to your library
Starring an album adds the artist and album to your library
Starring an artist adds adds them and all their albums to your library
Everything is grouped, first by a user determinable category, then by artist. Artist appears as a 1 line summary.
Buttons at the top determine groupings - A-Z then Artist, Genre then Artist, Decade then Artist
An A-Z filter allows quick access to Artist and Genre when in that sorting mode. This becomes a timeline in Decade mode.
Each time you drill to Artist there is a "more" button which links to the Artist Spotify page.
Rather than choosing to make all Library tracks offline this is done at Artist, Album and Track levels with a button by the title.
The Library system then becomes the ultimate collection management tool and playlists then go back to what they truly should be - mixtapes.
In my opinion this is the most important update to the iPad/Desktop/Mobile apps that Spotify could make.
Now with Your Music you can save and find your favorite Songs, Artists, Albums and Playlists all in one space.
You can read more about how to use Your Music features right here.