The passage is vague enough that people who don't have my particular ideas about the nature of Ainur and consciousness could probably find a more sympathetic interpretation of it.

My headcanon has the Valar insisting upon these measures partly in a classically misguided attempt to keep the Istari from hubris, and partly so that if they do get captured by the dark powers while in M-e not as much intelligence about recent Ainu/Vala activity can be got out of them. Can't give away what you don't remember. And yes, tackling this in a story would be tricky because sufficient motive for the Istari to agree to all these indignities will have to be portrayed.