As for the music and instruments part,
How about they add more emotes with instruments (preferably physical ones, not holograms)
And using the emote and playing the instrument will lower any backround cantina music for nearby players (so your not outplayed by those NPCs) and you will play a random song while using the same animations for some of the hologram instruments now.
Now, here comes the band part. I'm not sure if this should only work if they are in your group or just nearby, but if someone else uses an instrument emote, they will automatically join in at that exact point in the song you are in. This is so if a bunch of people fail to use the emote at the same time, or join in later, they won't be overplayed and sound like bantha turd.
As for the instruments, there's really no limit. I'd like to see a variety of different kinds with different sounds so that a band sounds very diverse, and also maybe inspire some band guilds with a Star Wars themed guitarist, etc.
Now for the songs, I guess for the sake of simplicity, can be the same old cantina songs, only transferred into the instrument sounds, however later I'd really hope to see a dropdown list where you can choose from a variety of classic Star Wars, community made, and other classic songs with a Star Wars twist on them.