Because O'Brien was a character who evolved gradually bit by bit rather than through any kind of systematic plan, so the idea of making him a chief petty officer came along well after they'd first put him in a uniform with lieutenant's pips. And it took them a while after that to get around to designing a pip for a CPO. Series fiction is often made up on the fly and so there are things in early episodes that get overwritten by later continuity. You see a lot of this in early TOS -- James R. Kirk, lithium crystals, Vulcanians, UESPA, etc. There was a fair amount of it in early TNG too, particularly because of the behind-the-scenes chaos and the heavy turnaround in the creative staff in the first season or two.
I don't think Roddenberry even wanted there to be enlisted personnel in TNG. By that point, he'd adopted the idea that all Starfleet personnel would be highly trained spacefarers and the equivalent of officers.
The "holodeck matter" thing was a simplification for onscreen dialogue. The actual operation of the holodeck, as explained in the behind-the-scenes technical notes and eventually the TNG Technical Manual, involved a mix of holograms and shaped force fields to simulate large or mobile constructs and replicators to create real props and items that players would interact with (for instance, food or drink replicated on the holodeck would be real).
I think the writer of "Elementary" intended the paper's survival to be a clue that Picard was lying to Moriarty about his inability to survive outside, but I'm glad they cut that out, both because it contradicts the tech notes and because it casts Picard in a bad light.
