Why is it so hard to understand? Itachi is blind. He can't see well enough to fight like that. Genjutsu and MS Jutsu do not reflect overconfidence- they reflect his desire to end the match quickly, as quickly as possible. Tsuyukomi and Amateratsu would have brought him victory almost any other day; it's just unfortunate that it is not this day.
And no, it is not obvious that two Sharingan's cancel each other out. Even if they are both Three-Tomoe, Sasuke would have to have the same level of skill as Itachi- or close enough- to fight evenly with him (this was part of Kakashi's prolem). He tried Genjutsu partly as a test to see how well Sasuke had developed the Eyes, and he saw that Sasuke had done enough to counter his well enough. He had no problem with that- he expected, or hoped for, nothing less. He could not have expected Sasuke to have developed it to the point where he could counter Tsuyukomi, which normally would hasve ended the fight then and there.
If Itachi and Sasuke spen Chapters fighting with all of there other Jutsu other than MS Jutsu, then we would be wondering why does'nt he just bring them out? (I think a lot of people did, wonder why he had'nt use his Mangekou earlier in the match before he pulled off his Tsuyukomi, in the first few chapters). After all, we knew as well as Itachi that they would beat Sasuke. Right?