On retail, using a string instrument increases the aoe radius of buff songs (and maybe horde lullaby) based on your string skill and which song you're doing, up to a maximum of 20' -- double the base radius. At 225 string skill (the unmerited cap at 75) Ballad 1 sung with String has an area of 20', while Ballad 2 is only 13'.
Meanwhile, wind instruments instead get a macc bonus for debuffs; the
only reference I can find in english says it's 1 macc per 3 wind skill, stacking on top of the baseline 1 macc per 1 singing skill. If you aren't going to just be a buff bot, you're going to want to mostly keep your wind skill up and stack CHA so you can stick your debuffs for full duration.
The +song effect bonuses on instruments generally affect song potency rather than accuracy or radius. +Paeon increases the strength of the regen by 1 HP/tick, +Lullaby increases the duration by 3s, etc.
That said, I haven't played bard enough on Nasomi to say what server-specific differences/bugs there might be.