Although I have never thought about it this way before, I find myself drawn to BillJ and T'Girl's conclusions about this episode. A guilded cage is still a cage. And Picard was given no indication that he would be able to return to his life on the Enterprise unaffected by his experiences.
But was the program as limited as T'Girl thinks? I disagree. Oh, sure, Picard was stuck in Kataan's version of "The Sims," but that doesn't mean everything was completely fixed. I like to think, based on the examples of Picard calling for the Holodeck exit, etc..., that some things were random. Maybe he would have children, maybe not. Maybe he and his wife would divorce. He just couldn't leave "Simmville."
Did he have to cooperate with the program? Was that even the point of the program? The Kataan people simply wanted someone to remember who they were. As long as "Picard" lived the rest of his life on their planet, he'd remember.
Oh, they did work in the flute. It seems he was predestined to learn the flute.