[Event] All (4) hobbies are already taken, can't switch to finish event

They don't mean a new-new hobby, just a new hobby to your Sim. Which is pretty easy to do when you just swap out the current hobby. From what I know you can do this without losing progress. 

If there are four Sims and four Hobbies in the house, and all four Sims already occupy a hobby, you cannot select anything. There aren't more Hobbies than 4 except for the piano - which I do not own, and did not plan on buying, especially not specifically to finish a quest... to unlock a new hobby. 🙂

Swapping would be possible if at least one of these hobbies would be 'unclaimed'. Otherwise, if you try to do that, you receive a message that "Sim X is already on that Hobby". And, as I mentioned, four sims already have four hobbies, hobbies cannot be 'abandoned' without clicking on a new one first, which again - is not possible. Hence, blocked.

I switched one of my sim's hobby but they had already completed the first hobby. The game did save  the first hobby as completed. I don't know if this applies midway in the middle of completing a hobby 

You later have part 17 where you need two sims to complete hobby story chapters. it requires to complete level 3, 7 or 10 . you can do any combo. Lucky I have two sims that need to complete level 10 

That's the problem - this generation of Sims is relatively new (young? :P) and on levels ~6 with their Hobbies, so trying to finish two hobbies (for two Sims obviously to free up a spot), then learning a new would take more time than ~24 hrs left to finish the event. Let alone wrapping the quest chain up.

Just a suggestion your eventually going to need the piano hobby. Is there a way to obtain this hobby without buying it? This is if you want to complete this quest and have the piano hobby for the future. I get where your coming from that you would feel forced to buy the piano should you want to complete this quest. 

If you decide to buy the piano hobby and switch, I would not do it to the sims you have at level 6 hobby..You will need those sims to get to level 7 for number 17 of this quest 

I forgot you only have one day left to complete this quest so if your only at level 8 you would have to pay sims cash to complete it. There are several 7-8 hour quests and you can't use several sims at the same time to complete. Each level has to be completed one at a time 

The piano comes with an heirloom and no you don't have to retire your sims for you get the piano heirloom. the piano heirloom unlocks the piano hobby. It's better to have your sim have a musical trait. 

Your sims leave their own heirloom when your retire them. It may be an heirloom not associated with the hobby they were in. It depends what you have already unlocked in the game. I had a fashion sim that left me a trait heirloom that was the competitive trait 

That makes sense, thank you for the explanation.