All my hangouts are archived, yet Google Hangouts is deciding to show me some arbitrary list of people in there. How do I hide some of them? This list I can see in both gmail and g+.
They default that list to 10 people. Unfortunately there is no way to remove the arbitrary list of people. If I understand your observation correctly, it also occurs when you start typing a contact's name in the search box as if you were going to chat/(hangout) with them.
After noticing the above - that you cannot alter your list of Hangout contacts - I decided to just sign out of Hangouts and revert to old chat since I don't usually do Hangouts. It's not the best fix, but it's a good way not to have to see exes and other jerks you used to chat to!