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Its purpose is not found until much later in the game in the town of Rosehill in which playing it in an exact location in the village grants access to Rose's chambers. The party knows this thanks to a dream that they have in the inn at Strathbaile. They are told of this dream by people at the Burland castle.
In the dream it can be seen that Psaro plays a flute at the location that grants access to Rose's chamber. However, it is unknown if Psaro is playing the Flute of Revelation or simply a common flute. However, since it is a special item it can be assumed he is playing said flute. However, how the item ended in Zamoksva's hands is a mystery.