Deneb doesn't have to hold the record for furthest out, just furthest out in that direction. Head out another way and 2600 LY could still be in Federation space. There could be a Federation world 4000 light years from Earth in one direction and another 4000 away in the opposite direction, making the Federations maximum dimension 8000 light years.
You can come up with a number of speculations about what it
could mean, but my point is that it's such a vague and illogical line that it can't be taken as authoritative
proof of a damn thing when it comes to the Federation's size.
Generally, TOS seemed to suggest that the radius of the Federation was less than a thousand light years. Miri's duplicate Earth was "hundreds of light years from Earth" with "no colonies or vessels out this far." Gothos's star desert was 900 ly from Earth and en route to an Earth colony. Gary Seven's home planet was at least 1000 ly away and it was beyond known space.
The Undiscovered Country had Kirk claim they were "a thousand light years" from Federation Headquarters while on the Klingon border, although that could've been figurative. In TNG, Q flung the
Enterprise 7000 ly to encounter the Borg, and that put them more than two and a half years from the nearest starbase. Malcor III in the episode "First Contact" was over 2000 ly from Earth and was presumably in unclaimed space.
Now, in DS9, we started to get references suggesting a smaller Federation, and not just because of travel times. "Fascination" claimed that Bajor was 300 ly from Regulus, which would put Bajor an absolute maximum of 380 ly from Earth if it were on the exact same bearing as Regulus. "Trials and Tribble-ations" asserted that Deep Space Station K-7, along the Klingon border, was over 200 ly from a point midway between Cardassia and Bajor -- which would seem to put the Klingon border much closer to Earth than the 1000 ly Kirk claimed in TUC.
So while the evidence we have is certainly inconsistent, almost all of it suggests that the Federation's borders in both the 23rd and 24th centuries are on the order of several hundred to a thousand ly from Earth. Picard's FC line is the only exception I can find. It's the outlier among the available references, and since it clearly doesn't fit the rest, it can't be considered definitive. Especially since it isn't even clear what it means.
The one way I can see to reconcile Picard's line is if he meant the Federation is 8000 ly in
circumference along the galactic plane. That would correspond to a radius of about 1270 ly if we assume a circle. Of course, it isn't a circle, and we know the Cardassian border is much less than that distance from Earth, but at least it puts us in the same ballpark as the other evidence. Although it would be a very odd choice of words.
Heck, maybe Picard meant to say the UFP was eight hundred to a thousand light years across, but he misspoke. He was under a lot of stress, after all.