I think you have every right to be upset! (Though I can relate to the 'is this just my paranoia' feeling - I get that ALL the time) I know I would be in your position. I'm not a lawyer or anything but I do know my ex T was based in the same clinic as my doctor, and she could not reveal anything we discussed unless there were extreme circumstances (I think she would be forced to break confidentiallity if she believed I was about to take my life for example). I used to work in a clinic and I know details of the counselling sessions that took place there were not kept on patients computer records.
Personally I don't think you are over reacting at all. I got embarrassed enough in hospital with people seeing my body let alone the transcripts of my therapy sessions!
Did you sign/agree any kind of contract before you began with this T?