Visual Workflow Issue – Get Records Element Not Sorting Correctly in Flow

Using the Start element's filters allows Salesforce to handle the transaction size automatically so you don't have to. This actually runs as a hybrid scheduled/batched job. This is explained in the documentation:

Schedule an autolaunched flow to start at a specific time and set it to run once, daily, or weekly. To have the scheduled flow run for a batch of records, specify the object and the filter conditions that each record must meet.

A flow interview runs for each record in the batch and stores all of the record’s field values in the $Record global variable. As you build the scheduled flow, reference the $Record global variable to access the record’s field values.

This also eliminates your concerns about adding records to a Collection and trying to update them somehow. That's actually rather trivial, but an unnecessary step, since the Start element's filter is purpose-built to handle this for you.

Note that even though it seems like there'd be one DML for each record at the end, there's only one, because of Flow Bulkification, as explained:

When multiple interviews for the same flow run in one transaction, each interview runs until it reaches a bulkifiable element. Salesforce takes all the interviews that stopped at the same element and intelligently executes those operations together. If other interviews are at a different element, Salesforce then intelligently executes those operations together. Salesforce repeats this process until all the interviews finish.

That challenge requires you to create the "Possible Matching Account" field on the lead that is a lookup to an account. Being a lookup means that the field only accepts ids for the object it looks up to (an account Id in this case).

If the challenge had you create a text field then it would make sense to assign the Name field instead.

So, answering your question:

Is it because the Possible Matching Account field is a Lookup and it just automatically returns the matching Account Name instead of the Account ID?

Yes. Lookups on page layouts show the "name field" of the record in the UI.

Name fields are fields that are used to identify the name of an object. Usually it is the Name field for custom objects, but for some standard objects it might be different, such as for the Case object, where the name field is the CaseNumber and for some objects that identify people, where the name fields are FirstName and LastName. You can retrieve the name fields of an object through the UI API.