One thing about these questions that tends to nettle me is that the answers generally presuppose that because humanity has been one way within recorded history, it will always be that way. That, to me, is a bit closed-minded.
Consider that there have been many societies across many ages where a man was not a man if he was not competent in combat, but men are managing to endure and adapt as fewer and fewer need go into battle. There have been ages where a woman was not a woman if she could not or did not bear children, but as that paradigm shifts, women aren't being phased out or losing the ability to find meaning in life with or without childbearing.
I see the scenario proposed as a clear utopia, for it is a world where no one has to do anything they explicitly don't want to, but is free to do whatever they want. No one has to go hungry. No one has to work a grueling job to put food on the table. No one has to take from someone else to have enough. Everyone has, at the bare minimum, the foundation of a happy life and the freedom to pursue fulfillment by whatever means they choose.
All of the dystopic concepts are being projected into it. The AI in the scenario as proposed is only concerned with maintaining that baseline happiness. It glitching out or going rogue is a possibility external to the scenario. The scenario also makes clear that people can do whatever they choose, though presumably not anything criminal. Since there's no incentive to crime beyond that enforced by a deranged mental condition in the presented scenario (and since the AI provides medical treatment that could work on such a condition), I'd call that a non-issue.
All that considered, I conclude that it is indeed a utopia and could only become a dystopia if a person chose to sabotage it, and frankly, I'd hope the AI could stop anyone who tried. No one is forced to do anything, but can do anything that they wish (quite literally with the VR factor). What more could one ask for than that?