Out of curiosity, what's the difference between that "duck blind" in TNG (using holograms) and a cloak?
Probably similar to the difference between a B-52 carefully painted in camo colors and an F-22. The former may briefly fool your eye, as long as the plane is parked against a suitable background; the latter fools your eyes
and IR and RF sensors during an attack run, long enough to make you dead.
Romulans wouldn't bother to ban camo paint, but they'd do everything they can to ban stealth devices that they themselves cannot detect. Against the Klingon cloaks, they couldn't do much - but apparently they can frighten the Federation to submission somehow. Which I think isn't all that unexpected, when one considers that they fought a war against Earth back in the Archerian days whenten lightyears was a long distance.
Take that enemy, boil under a lid of a Neutral Zone for a couple of centuries in a broth of hatred and desire for revenge. Add a few cups of top-notch industrial espionage and single-minded engineering effort. Watch out when the lid blows and a technologically advanced, driven enemy emerges just a short hop from Earth. The defenses that would grind a Klingon attack to a halt across a few dozen lightyears would be powerless to resist a short range, cloaked Romulan penetration. Earth could be bombarded to rubble before Starfleet HQ could yell "Damage report!".
Since the cloak is mainly a tool of offense, and has limited defensive applications, the Federation might be happy to give it up if it appeased the Romulans. And Starfleet in the early to mid 24th century might count on discreetly getting Klingon help whenever they needed an invisible spyship; this kind of an arrangement might be easier to hide from the Romulans than an indigenous cloakship setup with all the associated R&D, MRO and operating organizations. The Feds could always covertly give expert advice to Klingon cloaking engineers to create better anti-Romulan cloaking systems (and, by having a hand in Klingon cloak development, they would also learn a thing or two about Klingon cloaks in case the allies one day proved untrustworthy).
It's not all that different from, say, the US agreeing to drop anti-ballistic-missile development but then continuing it via Israeli proxy...
Timo Saloniemi