Picard did make a comment like, "remember when we were still explorers?"
Exactly where Insurrection fits into the overall Star Trek time line isn't clear, however the Federation either just was, or was currently, fighting a brutial war with the Dominion. Yes we did see her performing a diplomatic mission, and there was talk of a science mission, but it's unlikely that the Enterprise saw no action, and experienced no deaths.
Picard certainly would have read the lists of dead and wounded.
So his dreamy eyed view of the Baku quaint village could have come from there. He was tried of war. Even to the point (in a deleted scene) were he said he wouldn't permit anyone to build any settlement elsewhere on the planet. No one, no "outlanders," would be allowed to come to the ring planet and receive the benefits of the rings, only the Baku could do so in Picard's eyes.
And of coure himself while on leave.