Am I being overly paranoid?

Yes, simply connecting to the Tor network is not a sketchy thing and browsing the clearnet using Tor is a smart way to preserve your privacy if you aren’t in a hurry for your pages to load.

I used to browse the clearnet with Tor regularly but eventually I decided it was overkill and stopped (Tor really is slow a lot of the time so it isn’t always a walk in the park).

IIRC the government has actually always had a large number of nodes because the government helped to create the Tor network. I don’t think they operate “most” of the entry and exit nodes though. With appropriate precautions it is still a hugely effective tool to preserve privacy.

For example, the person who ran the “Silk Road” (formerly the most famous website marketplace on the darknet) was only caught because of revealing personal information theough forum posts and on the clearnet, not because the government can see the traffic of anyone using Tor (which they cannot if you are using https). There are way too many curious high schoolers out there for it to make sense for them to monitor like that anyway. The more people who use it, the more effective of a tool for privacy it becomes.