'Ulla, on his return from the college,20 used to kiss his sisters on their bosoms; others say, on their hands. But he is self-contradictory, for 'Ulla said, Even any form of intimacy is forbidden,21 because we say, 'Take a circuitous route, O nazirite, but do not approach the vineyard.'22I think that with a bit of contemplation we can resolve this contradiction in Ulla's position. The action of Ulla is somewhat local, though not necessarily entirely so. We can understand how this entire section might have been imported from a foreign sugya, based on the discussion immediately above, which is about "approaching" and those who are near of kin:
Come and hear: And hath not eaten upon the mountains, neither hath lifted up his eyes to the idols of the house of Israel, neither hath defiled his neighbour's wife, neither hath come near to a woman who is a niddah:18 thus a woman who is a niddah is assimilated to his neighbour's wife: just as his neighbour's wife, he in his garment and she in hers is forbidden, so if his wife is a niddah, he in his garment and she in hers is forbidden. This proves it. Now, this disagrees with R. Pedath. For R. Pedath said: The Torah interdicted only intimacy of incestuous coition, as it is said, None of you, shall approach to any that is near of kin to him, to uncover their nakedness.19There is a parallel sugya in Avoda Zara 17a where this whole discussion repeats. However, we see that statement of telling a nazir to avoid the vineyard from other Amoraim (e.g. in an exchange between Rabbi Yochanan and Rabbi Assi).
However, it is the setama who is arranging this contradiction, and the setama usually bases himself on something we can find elsewhere by itself. Yet we search and do not find the isolated statement. Perhaps one could say that the isolated statement was obliterated, because in all cases the gemara decided to oppose the action with the statement.
However, what I think really happened is that the statement was made in an entirely different context, in Pesachim about certain types of Chametz.
ש[דתניא] ר' יוסי אומר שורן בחומץ וחומץ צומתן כי אשמעינן ליה לרבי יוסי הני מילי דאיתיה בעיניה אבל על ידי תערובת לא עולא אמר אחד זה ואחד זה אסור משום לך לך אמרינן נזירא סחור סחור לכרמא לא תקרב
I think the gemara took that position of Ulla as a general principle, thus extrapolating to conduct toward one's relatives. But Ulla only applied that approach in limited circumstances, not relating to conduct toward one's sisters.
By the way, bosom vs. hand is a girsological issue, and that is what "some say" means. Different manuscripts have either a yud or a chet there. I can't speak towards which is more plausible. I lean towards hand, but that might be my cultural bias at work. Certainly bosom is something that would spark more of an objection, but indeed, under lectio difficilior, that might be a reason it is less original. At the end of the day, I don't know.
Also consider that the gemara's statement that ופליגא דידיה אדידיה could have influenced such a mess-up towards hands from bosoms.