Picard hugs Hugh (ah!) because at that point he could use a friendly face, not because he was a friend. He says it out loud... Also, he has still a lot of psychological issues with the Borg, as previously showed also on First Contact, issues that are now quite rooted in him a few decades later, while I was not too fond on how the cube was treated afterwards the parts about Picard dealing with his feelings were a masterpiece.
You know after watching it all again I've come around to liking it. I liked that they had 7 of 9 there too and that Picard knew her. Just a shame she didn't fit well back into Federation society, but as a ranger she is badass. I hope we get to see her again.