Right, which is super similar to if we ask (Siri, etc) to play music for us. It just starts playing (Spotify) and chooses what we like.

We're living in the Star Trek future... except we're the Ferengi instead of the Federation. Sigh. I'm voting for Rom for our next Grand Nagus.

Anyway, so back to the original question: is the ship's computer and holodeck more like a library of music and games/programs or does it rely on AI to generate new music, dialogue, stories, etc?

So here we have a musical AI that interpolates his own music. Although maybe like the Voyager EMH, the DS9 version has developed more personality and awareness from being on for so much longer than normal?

Counterpoint: Vic Fontaine.
He claims to have a small amt of self awareness AND creativity- able to play "I'll Be Seeing You" in dozens of styles for Nog.
Assuming that program isn't exclusive to Quark's bar, it means (tens of thousands?) of Vic programs could exist through the galaxy, all unique?

So it seems like the holodecks don't really use AI either (and apparently "Holonovel Author/ Programmer" is a job people do in the 24th century. (Sounds great! Sign me up!)

Again, it appears from how the Voyager crew experience this holodeck program, the artificial characters (NPCs?) have fairly limited programming in how they react to the "player character" and their decisions. It seems more similar to a classic BioWare RPG or Baldurs Gate 3 or something- just 3D.

And it means the holodeck computers are generally not capable of creating characters with true Artificial General Intelligence, much less Superintelligence.
Similarly in "Our Man Bashir" the crew get stuck playing characters in a 60s spy thriller.
Which brings us to Tuvok's holonovel:

So when the computer is asked to create a villain capable of defeating Data, it creates Moriarty, who has a level of sentience that everyone is shocked by. So it stands to reason the computer generally is not really a true AI (and there are several episodes about the dangers of this!)

Similar but related question about the holodeck? How much is the computer generating new vs what is already pre-defined?
Again, I think evidence points to its pre-programmed and the computer isn't doing that much generation of new content.
Evidence? Moriarty, and Tuvok's "holonovel."

And I think this is a big distinction because it means in our best state, we still have people making music, learning instruments, not just prompting an AI to give us something that is just an algorithmic amalgamation of music in its database or knowledge of music theory.

That's comforting.

If the computer essentially is more like Spotify or Apple Music (just a big library with an interface) that's different than the programs people are using now to ask "Turn this 90s grunge song into a classic soul song" or "Give me a song in 7/4 time with trumpets" or "gimme a song about butts."

I'm interested in this question because I am thinking about how we are going to govern and interact with AI in the future.
Star Trek is kind of like a Platonic "City of Justice" where we can imagine a classless society where want is eliminated. How do we then work backwards to guide our lives?

Duh, to look cool.

And like... be a cat. Or a bug.
No, but seriously-- you do get a bonus HP pool = your druid level and you get the AC, attacks, abilities of your wild shape. So that's still cool.