In his defense, he was in a highly stressful situation and the ship's computer added what I've always felt was an inappropriately "flirty" personality. He was honestly expecting she'd more closely resemble what he thought was an approximation of the real engineer. I agree the holographic meeting was more cringey than Reg Barclay's fantasies.

The human Jean-Luc Picard died at the end of Season 1. A synthetic replica was created and the memories and experiences of that man were expertly transferred to it's artificial brain. Presto, you've reset the character to some extent. He now has more in common with Data than the rest of his former crew. You can do whatever you want with this essentially new character.