Bismillah
as salam alykom
I remember 13 years ago, I was going thru a tough test from Allah, I was not yet married.
I met someone, he told me wont you get married. I said I dont want to give up my freedom.
He replied, the complete freedom lies within the absolute enslavement (or as Dan calls it which i do prefer) devotion to Allah. Thus, if we want to compare this concept with the above mentioned hadeeth. Hypothetically speaking, the Muslim or devotee is imprisoned within the boundaries of Allah's limitations. However, I think the Messenger salla Allah a`lyhee wa sallam meant with this hadeeth to remind each of us and reflect upon the Ayah, or to be more precise, as we all know that Sunnah is just an explanation of the Quran. The hadeeth builds on, reflects on, and explains the Ayah:"But as for him who feared standing before his Lord, and restrained himself from impure evil desires, and lusts." (Quran 79:40)
Matter of fact, Deen I echo what Dan said, I do enjoy this topic aaaa lot. One of my favorites actually. It is the essence of what Islam is.
Therefore, hypothetically speaking, yes a Muslim who abides by what Allah ordained to the non believer seems imprisoned. Yet, we do enjoy this imprisonment a lot. We actually take pride in it. We feel like special for being imprisoned within Allah's boundaries. While it is the paradise of a non believer who sees it as the utlimate goal. Also remember that Allah Say in Quran:
"Who, out of His Grace, has lodged us in a home that will last forever; there, toil will touch us not, nor weariness will touch us." (Quran 35:35) To us this is the goal, unlike the non believers who percieve this Dunia as their ultimate goal, which is free of any limitations. To them, they can do whatever without thinking twice. They even develop their own ethical regualtions.
This hadeeth has so much deep meanings that would require a book to explain. I tried my best, may be I will come back on my next break from work...