Janeway has the same issue with her rank in Nemesis. Wait, what if we are interpreting Admiral ranks wrong. Rear Admiral is 4 pips plus a box, promotion removes a pip, so Ross is a Vice Admiral with 3 pips and a box. Admiral is 2 pips plus box, and Fleet Admiral is one pip in a box. We've never seen the 2 and one pip version, which makes sense because they would be much more rare.
Interesting idea but the on-screen evidence would pretty much contradict that.
When the bars were first introduced in TNG, *every* flag-rank character wore three-pip bars as a rather generic insignia, regardless of how they were described in the script. This included, at times, characters described as "Vice-Admiral," "Admiral," or "Fleet Admiral" -- but they all wore uniforms with three-pip bars.
The first two characters to wear the two-pip bars were the Academy Commandant in The First Duty and Pressman in The Pegasus -- but, IIRC, neither had a specific flag-rank grade grade assigned to them in the dialogue for those episodes. The four-pip bars were conjectured but not actually seen on-screen until much later. I *think* the first appearance was probably Adm. Paris in VOY. **Edit -- see below!!
In truth, the expansion of the insignia to include two-pip bars and four-pip bars alongside the three-pip bars was something of a retcon, mostly just correcting something that had previously been completely overlooked by the costume department. Nevertheless, the seniority was fairly clear: four-pip > three-pip > two-pip > Captain.
The Encyclopaedia may not be fully "canon" but the explanation was always: five-pip bars for Fleet Admiral (albeit never seen on-screen), four-pip bars for full Admiral, three-pip bars for Vice-Admiral, two-pip bars for Rear Admiral and one-pip bars were also never seen on-screen.
Given the nature of Starfleet's organisation and the variable attention it pays to it's military role, I guess it's fair to say that appointments to various flag-rank positions are likely just that: appointed roles rather than substantive ranks on a fixed ladder in the way that we would understand them now.
Picard could well have been the most senior captain in the whole of Starfleet when he moved on from the Enterprise, probably with substantially more command experience than many junior admirals. It's not beyond the realm of possibility that under Starfleet's system this may have been more than enough to make him eligible to move straight into a three-pip appointment and then he was subsequently re-graded for whatever came next with his big mission.
It's a little bit of a work-around but it seems more plausible than trying to reverse the entire rank structure.
** Edit:
Actually, I'm going to correct myself and say that I think the first on-screen appearance of the four-pip bars was Adm. Will Riker in the future segments of "All Good Things..." but, in my own defence, I was primarily thinking of the "contemporary" main timeline (!).
