...But I tried to argue why that could not happen - Cardassia would own the neighborhood even before the occupation.
Picard: "We were saddened by those events but they occurred within the designated borders of the Cardassian Empire."
The "events" include Cardassians taking the Bajoran homes, according to Keeve Falor. So Picard might well be saying that the initial conquest of Bajor by Cardassia took place within the designated borders of the Cardassian empire already.
Much would then depend on how recently said empire had gone all bellicose and possessive about its interstellar vicinity - another unknown in the general Trek timeline. Did it happen during Gul Madred's lifetime, or was it already ongoing well before that?