My headcanon regarding the federations seemingly impossibly rosey outlook on psychological trauma is that they genuinely have good mental health treatments. That we have the ship’s counselor as a member of bridge crew in TNG is indicative of how important and useful they are.

Between that and psychics existing, the federation is pretty good at dealing with trauma at least in a way that keeps things functional.

In the case of inner light however I suspect the device was designed to have a dreamlike quality to it since it wouldnt be helpful for your knowledge spreading device to cause trauma to whoever it comes into contact with. You remember the important bits and major pieces of historical information but a lot of it kinda fades as just a dream.