Does the Chinese government really care what their impression or the world's impression of the situation is? They care what the average Chinese person's impression is and, seeing as they completely control the message that is being sent to the average Chinese person, they do have the power to shape that impression.
Honestly, they probably don't really even care about the impression of their citizens except for the fact that creating a certain impression for the citizens helps them maintain power. This is the sole focus. They don't care what the rest of the world thinks of them as long as they maintain power and, right now, the amount of power they hold over the whole world – through propaganda at home and through $$$$$$ everywhere else – is astonishing. To them, the Olympics is just another chance to spread more propaganda at home (and probably hope to spread some around the world, though I think they are finding it's a bit harder to control world media than to control national media).