I am sorry to hear about your bad experience with guitar placement.
As you also imagined, unfortunately, there is no way to track the position of an object without physically holding it in your hand and having a tracker positioned on it in the real world.
Since the game doesn't know how your arm is bent and where your body is, and both HMD and controller movements contribute to the guitar movement, the game has to make the object pose estimate without taking into account the differences in body size, individual differences between people (neck length, just to make an example where it's difficult to discern if you're just moving your head or your body).
Some people may need a little more time to get used to the system before they can start to "feel" the position of the virtual guitar in space with the right confidence based on feedback like picking vibration feedback and muscle memory.

However, have you tried activating free movement for the hand holding the guitar neck in the settings? That way, your hand position will not influence the guitar position anymore. If you feel it is more comfortable, we can add the option to have the guitar behave like that, even without the free-hand option enabled.

I tried freehand briefly, but that makes it really difficult to press notes, as the default hand position makes it almost impossible to press the top notes without extending my arm out all the way.

There's also an option to speed up the hand movement to reach further without extending too much. There's also the 'V' guitar model, which is purposefully smaller.
We will add an option in the following update to have both the guitar and the hand on the fretboard not moving, allowing you to stay comfortable without needing to reach further.
We'll also see if we can come up with a one-fits-all, smarter solution.