Baku is a planet in Federation space but it is not a member of the Federation. This is probably fairly common, after all the Feds don't force anybody to join their club.
I think the main point of the posters who think that Picard made an error is that there is a resource of enormous value which should be shared with everybody. I agree, it is not okay than only a few hundred people should gain from a "fountain of youth". But it is neither okay to just steal it from them as the Sona and Federation tried to.
And it is certainly not OK to judge the way of life of any of those numerous lifeforms out there. That's just Prime Directive 101. The Klingons are bloodthirsty predators and we certainly defend ourselves against them but we don't force our ethics down their throat. Biological fundamentals matter, it is very unlikely that such a predator creature would ever join the UFP. Thankfully even the Klingons have a hunch about the Prime Directive, the understand that there aren't just noble warriors like themselves but also coward weaklings out there and while they claim that today is a good day to die they are not that eager to do total war.
Same applies for a bunch of hippies. Not our job to judge them and they definitely don't harm us. But making an alliance with a bunch of "petty thugs" that stab you in the back at the first chance they get just in order to gain an ally in the Dominion War? That's just suicidally idiotic.
I don't mind criticism of the movie, its script is certainly not perfect. But denying what happened on the screen and pretending that fair is foul and foul is fair, that the hippies are wicked resource stealers who don't wanna share (ehm, nobody asked them) whereas the Sona are decent folks is simply factually wrong.
The movie as it stands is a simple morality tale and as FKnight has pointed out there are no options anyway, the Feds have to obey the Prime Directive. And before a big discussion about the Prime Directive starts, I like to watch and talk about Trek. The real Trek, not a hypothetical Mirror Universe Trek where the Sona are our lovely new allies and the Prime Directive doesn't exist.