In the book "The Art and Soul of Blade Runner 2049," actor Ryan Gosling says the script did not specify what the significance of the Nabokov quote in the Baseline Test was. According to the same book, the Baseline Test, as we see it in the film, was largely developed by Gosling himself in his research for the character.
When Joi asks if K wants to read, I understood him to reply "you hate that book." The original post seems to think it is K who dislikes the book, but I think that's a mistake.
I've only just started reading "Pale Fire," so I can't comment on the content and how it may relate to the themes of the film. However, there may be something to be said about the 'metafiction' of Pale Fire:
Nabokov (real author) writes a novel about a fictional author (Charles Kinbote), who is writing about a poem (another creative work of fiction).
In Blade Runner 2049, real humans have created K (a replicant). K, in turn, owns an artificial life form in Joi.
A flimsy analogy, perhaps, but it would explain why Joi hates the book--it reminds her that she's completely artificial, and has no real agency of her own. She's not even a replicant, she's one rung below them.
Here is a quotation from the book (page 117)
The Baseline was always a scene to me that held the key to understanding K. I wasn't sure what that key was during the preparation period of the film. In the script, the character was meant to read a small passage from Nabokov's Pale Fire, but there wasn't any insight as to why.
In order to better understand the meaning of the passage and to give it a personal meaning, I enlisted the help of a wonderful vocal coach named Natsuko Ohama. She suggested a technique called 'Dropping In.' In this technique, you explore the meaning of each word of the text by exhausting every conceivable context in which the would could be used.
The process is very long and repetitive, but it has a trance-inducing effect that can be very powerful and unsettling. I felt that if that technique were extrapolated into K's experience, it could be used to penetrate his psyche. I believed we could learn through a process of psychological erosion what his true emotional state was.
I was very grateful to Denis for incorporating it into the film, because it unlocked my understanding of K, but also provided insight into the state of mind of those who would force this burden upon him."
Gosling's text is prefaced by a note by author Tanya Lapointe:
On July 14th, Day 4 of principal photography, Ryan Gosling delivered and alternate Baseline script that lasted eight minutes. On this page the actor explains his process in achieving such a hypnotic performance.