If you allow genetic modifications, you inevitably end up with a situation where people become genetically optimized for specific jobs. That results in a caste system, and some people that might want to be on the crew of a starship never having the opportunity to do so because they don’t have the correct genetic enhancements. So there’d be some people assigned to do all the cool stuff and an underclass relegated to menial jobs because of lack of genetic enhancements. Technology isn’t developed to be accessible to everyone only for people with the genetic enhancements needed to use it.

Seems very dystopian and goes against the Federation’s goals of favouring equality over the capability to dominate alien races.

The Dominion was similar to the Federation in that they had a diverse group of alien races working together. The difference was the Dominion was all about genetic engineering while the Federation was opposed to it.

I think I’d rather live on a Federation planet than a Dominion planet.