The high fence is back, separating her house from the lake it stands beside – but this time it has been erected by her own people to protect her, not to lock her in. How free is Aung San Suu Kyi, five months after her 15 years of house arrest ended? Not very; or free as a bird, depending on how you ask the question.

Fragile yet strong as iron, the yellow and white roses in her hair belie her steely resolution. She had not been well when we visited her this week. Though she steps into the room with bright smiles, warmth and grace, her ramrod-straight deportment disguises painful spondylosis of the spine. Andrew Comben, director of the Brighton festival, and I as its chair, have come to film an interview, as she is guest director of this year's event in May. Since she dare not travel abroad, knowing the generals who have run Burma since 1962 would never let her return, we shall show this film of her instead. Her visitors will be followed, so it takes some subterfuge, ducking and diving in and out of taxis, a ferry over the river and sidling out through hotel back doors to avoid confiscation of our film.

Approached some months ago while still under house arrest, we wondered if she might think the idea of guest directing an arts festival absurdly frivolous or irrelevant to her country's struggle for democracy. But not at all. She accepted with delight: despite 15 of the last 21 years spent in solitary isolation, she has an ebullient enjoyment of many things. Arts matter, she says. "If you can make people understand why freedom is so important through the arts, that would be a big help." Exploring her artistic tastes, pleasures and memories has been revealing and moving. And surprising – of which more later.

As a surge for freedom storms across the Middle East, will it ripple on through dictatorships everywhere, including Burma? "Human beings want to be free and however long they may agree to stay locked up, to stay oppressed, there will come a time when they say 'That's it.' Suddenly they find themselves doing something that they never would have thought they would be doing, simply because of the human instinct that makes them turn their face towards freedom." Is that time now? "More people, especially young people, are realising that if they want change, they've got to go about it themselves – they can't depend on a particular person, ie me, to do all the work. They are less easy to fool than they used to be, they now know what's going on all over the world."

The Middle East is never mentioned in Burma's state newspapers, organs that make Soviet-era Pravda look like Wikileaks. The New Light of Myanmar carries front and back page warnings – "Anarchy begets anarchy. Riots beget riots, not democracy. Wipe out those inciting unrest and violence" – and attacks on the BBC and Voice of America: "Do not allow ourselves to be swayed by killer broadcasts designed to cause troubles." She laughs at it, calling the paper "The New Blight of Myanmar". Is the regime rattled? "People know what's going on because of the communications revolution. So people are becoming more aware of their own potential, and this has to be encouraged."

What might the trigger be? A 1988 uprising was sparked by the government abolishing existing bank notes overnight, so everyone lost their savings. The 2007 protests, joined by the monks, began with soaring rice prices. "Once the army starts shooting, most uprisings are put down pretty quickly. But how long the people will remain quiet after something like that is another matter." People look to her, and now she is free the National League for Democracy has a new impetus, though organising is extraordinarily difficult with all its leaders among the country's 2,200 political prisoners: 65-year sentences were handed out to students. "Fear, fear, fear" is everywhere, she says.

Except inside her. In 2003 they tried to assassinate Aung San Suu Kyi when her convoy was set upon by government-organised thugs and 70 of her people murdered: beaten up and thrown into jail, she was put under house arrest until this year. Her people want her heavily guarded, but she refuses. She shrugs, and says if the regime wants her dead, there's little to be done. How free is she now? If she steps outside she is mobbed by thousands of admirers wherever she goes. She went shopping once with her son, but had to be rescued from the crush of well-wishers. "Luckily, I don't like shopping!" – and indeed shopping in Burma holds few enticements. Once the second richest nation in south-east Asia, despite rich resources it is now the poorest, as well as least free nation after North Korea. Is she free to travel the country? Unlikely, she thinks. She hasn't yet ventured out of Rangoon: "So far I haven't tried to go anywhere they wouldn't wish me to, but I must start testing the waters again." Her work detains her between the party's office and her home, her erstwhile prison.

Her long years in detention were so exceptional because they were partly voluntary. Most prisoners have no choice, but every day she could have walked free, headed for the airport and flown away, her captors glad to be rid of her for ever. Every day for 15 years she had to make that hard decision to stay, alone and isolated without her two sons, even as her beloved husband was dying of cancer in Britain, cruelly forbidden from visiting her. But if you suggest exceptional fortitude, she always refers to the other Burmese political prisoners kept in far harsher conditions, half-starved, their health broken. "I don't think I was the only one who volunteered. A lot of our people could have chosen not to go to prison if they had given up working for the movement for democracy." The generals' respect for her war-hero father, who died fighting for Burma's independence when she was just two, kept her incarcerated in her own home. This Nobel Peace Prize laureate was protected, too, by world opinion. "This word 'free'," she says of herself and the other prisoners, "we all think that we are freer than the people outside because we don't have to compromise with our conscience. We are doing what we believe in. We are not locked in by the bars of guilt. So I think this is what made us choose imprisonment rather than to stay – in quotes – 'free'. For us, that is how our lives are."

In the last five months she has revived the National League for Democracy, starting new humanitarian services, digging wells, opening clinics and schools with scarce money. Scrupulously, they take not a penny from foreign campaigners, only from Burmese donors. She laughs as she says that if they begin to dig a well, the government rushes in to dig a better one, "So that does a lot of good!" But it's hard to convene meetings with regional organisers without funds, hard to find out what's happening anywhere. She has just learned of mutinies in army bases from the BBC World Service, a lifeline when information is so hard to come by. She is relieved the BBC's Burma service has been saved from British government cuts, "puzzled" at the decision to cut the Chinese service. After 70 years, the BBC's last Mandarin programmes for China have just been broadcast.

Pressure from the outside world makes more impact than people realise, she says. That's why the generals felt obliged to shape a new constitution, though it leaves the same military cadre running the country in civilian clothes. Sham elections held just before her release were declared "deeply flawed" by the UN. Her party did not stand, since conditions included repudiating all its political prisoners and swearing support for a constitution that lets the army take over at any time. But it has been enough to allow neo-liberal Western economists to call for compromise and the lifting of sanctions, accusing her of stubbornness. "They say if we build up trade, it will bring democracy. They say what you need is a middle class, that will bring democracy." As in China? She mocks the idea. "But the IMF say the mess in the economy is due to mismanagement and not sanctions." She heats up with controlled anger at pusillanimous NGOs: "They invite civil servants to 'capacity building' training. But the problem with civil servants' capacity is they won't do anything unless bribed." Burma is ranked 176th out of 180 countries for corruption. "I talk to business people and they say (what prevents enterprise) is that everything falls into the cronies' hands."

Her message is that democracy and transparency are the only answer – but the NGOs steer clear of politics, which makes her burn with indignation. She quotes Graham Greene, "He wrote, 'Sometimes, if you are human, you have to take sides.' They say we are not ready to compromise. I don't know what they mean. Our minds are not inflexible, but perhaps our knees are inflexible. We are not down on our knees!" Her message is that politics is everything, nothing is apolitical. With crystal clear precision, she enunciates in capital letters, "I AM A POLITICIAN. That's a dirty word, but I write it on forms as my profession. I AM A POLITICIAN!" We talk about the universal contempt for politics, as voting declines in the West. "Just ask them if they would like to emigrate to a totalitarian state," she says. But does she worry that when freedom comes, people quickly forget as the everyday business of governing falls short of expectations? "I've always tried to explain democracy is not perfect. But it gives you a chance to shape your own destiny."

Despite everything, politics is not her whole life, as she talks of what the arts have meant to her. You might expect her to choose Beethoven: "For many people he does represent not just the greatness of music, but the greatness of thought behind it. I've often wished in these last few years under detention that I were a composer, because then I would be able to express what I felt through music, which is somehow so much more universal than words." So the festival starts with Fidelio, the prisoner's opera. In detention she played the piano daily. She talks of her devotion to TS Eliot when she was at Oxford reading politics and economics, so the festival is producing the Four Quartets, accompanied by a Beethoven string quartet. She mocks the awful poetry she was taught at school in colonial Burma, reciting "At Flores in the Azores, where Sir Richard Grenville lay" with a laugh. But here's a surprise. You might not expect her recently acquired taste for the Grateful Dead's Standing on the Moon. "Have you ever listened to it? I like it very much. My son taught me to like it. And Bob Marley. Well, I do like 'Get up, Stand up for your rights'. We need more music like that." So the festival has brought her Lee Scratch Perry, one of Bob Marley's mentors.

Before we go, she stops to fold an origami lotus flower to send to the festival, to join the thousands to be floated on the lake in Queen's Park to mark Burma's many political prisoners. Deftly her fingers fold it back and forth, and she smiles as she recalls doing origami with her young sons. There she is, the iconic beacon of freedom, worldwide symbol of fortitude and endurance, laughing and folding. As ever, with good humour and grace, she wears her heroism lightly.

Aung San Suu Kyi is Guest Director of Brighton Festival 2011. Brighton Festival takes place on 7-29 May. See brightonfestival.org (01273 709709)