I don't think you're overreacting. It's like when someone dings your brand-new car. It's a natural response.

You'll hear many people saying "it's a tool, not a jewel". While I generally agree, I think it somewhat misses the point. For me, if I chose to ignore small blemishes (no touch up), or allow the bike to get fairly dirty, I would start to ignore more important functional components. It's psychological. Secondarily, taking care of the paint, and "cosmetic" issues, helps me inspect areas I would normally pass over - like looking closely at the frame for cracks/issues.

I think the rubbing compound is overkill. I just had a paint chip off my bike; the sandpaper (again, very fine, lightly) worked fine - all you are trying to do is smooth the rough paint I see in your picture. But if you decide to go ahead with rubbing compound, make sure you clean the residue off very well before applying the nail polish.