He was also in the running to direct
"Generations", and I suspect that (at least in part) his back-and-forth about the size of his cameo was about playing a negotiating game with the studio, to see just how much Rick Berman actually wanted him for the movie. By saying he wanted a larger role, he was also saying that, as director, he wanted a bigger hand in making changes to the script as well. Berman turned him down, possibly on the grounds that it was a tight schedule that couldn't accomodate too many rewrites, or possibly on the grounds that he didn't want the TOS characters to overshadow the TNG ones too much
. So Nimoy walked from both the cameo and the director's chair.