It also sets the tone for Sisko, as well as the series as a whole. With that one scene, which remains one of my favorites, they instantly established that DS9 wasn't going to be a shadow of TNG. Even by the episodes end, when Sisko has accepted his new assignment, started to move on, and made his peace with Picard, you're left with the image of Sisko putting Picard in his place.
It's a powerful moment. "We met in battle."
The look on Picard's face. Sisko enjoyed it and it almost scares Picard because for a moment, he physically recoils before he can collect himself, regroup and begin to stand his ground.
Had they not been in uniform, or had it been anyone else, I think Sisko easily might have attacked Picard physically. This is after all the man who hit Q and was a complicit accomplice in the murder of a Romulan Senator for the greater good. Those don't develop overnight. The war might have pushed him to the edge, but it had to be there in him from the beginning.
So while everything we were learning a about Bajor and Cardassia, went a long way to establish the tone of what the show was going to focus on, Sisko's one scene with Picard established what side of Starfleet we would be dealing with. It wasn't the picture perfect version we were used to in TNG. It was dark and rough around the edges and for the rest of the series, they continued to go in that direction...much to my enjoyment.
Say what you will about DS9, because as with anything in Trek there are those that don't care for it, but you have to give them credit for doing something different and going where they had never gone before.