A90: Yes, the point of Versatile Performance is that you're actually doing the performance instead of whatever the associated skill is. This why the skills for each type of performance are related (e.g. Dance and Acrobatics). Because you're doing the performance, your instrument bonus - if there is one for that performance - helps.

So when you're doing Versatile Performance (Handle Animal) for instance, yes, you're actually blowing your flute like a snake charmer the whole time.