Versatile Performance is shown as including Masterwork instrument
A character with Versatile Performance (String) uses his Perform (String) in place of Bluff & Diplomacy.
"He can use his bonus in that skill in place of his bonus in associated skills. When substituting in this way, the bard uses his total Perform skill bonus, including class skill bonus, in place of its associated skill's bonus, whether or not he has ranks in that skill or if it is a class skill."
Note that it uses his "skill bonus". Bonuses to skill checks are not included.
So I would expect Cha, Class Bonus, Ranks.
I would not expect things such as Masterwork Instrument: "This tool is perfect for its intended job. It grants a +2 circumstance bonus on a related skill check (if any). "
Unfortunately PCGen does add the Circumstance Bonus from the instrument to his Bluff & Diplomacy.
There are some clarifications in the Paizo forums (though I can't bring them to my fingers) that tell us that you do not actually perform when using Versatile Performance, which confirms that an Instrument should not apply.
(It doesn't help that others are deeply confused by not RTFM, and keep assuming that you actually make a Perform check (which doesn't have e.g. Armour penalties) rather than using your Perform (Dance) bonus as the bonus for an Acrobatics check - after which the circumstances (armour etc) kick in.)
UE, not CR apparently.