Miles O'Brien tells about Seltik III. In "The Wounded" the fact he is a hero of Seltik III was introduced, including details of the events Miles is refering to.
In the scene where the Enterprise is slowly moving to intercept the Phoenix, Picard reveals to the Cardassians that Starfleet knows what the transponder frequencies are. When the Gul requests the Starfleet transponder frequency for the Phoenix, Picard orders Worf to transmit the prefix code for the Phoenix, who protests that it would help the Cardassians take down their shields. Kirk pulled this same maneuver on the Reliant.
The statement made by Captain Picard, that a long-time held grudge can become so familiar that one cannot get rid of it, closely mirrors the observation made by Captain Kirk: he too noticed that he bore hatred and distrust towards the Klingons for so long, that he simply couldn't believe their desire for peace.