No, you are not over reacting. You SHOULD take that baby to the ER. The O2 sat is too low, even for a baby. The sunken eyes could be a sign of dehydraton and she may need IV fluids and /or a different type of antibiotics, especially if you don't see her getting better. When you take your baby in to see a doctor, they see that baby maybe 5-10 minutes and they don't always get the whole picture of what is happening. If your baby is having difficulty breathing, don't put it off! Hun, don't worry that other people might think you are over reacting...that doesn't even matter. Your baby is what matters and she needs you to do what you can.
As a mother of three, I have had a few times when the doctor told me that everything was o.k. and we'd check back tomorrow. My gut told me that my child was not o.k. Two out of three times that this happened, my child was admitted to the hospital when we went to the ER. Trust your gut. If you don't feel that your child is alright, take her to the ER. At the very least, it will put your mind at ease.
Your daughter is pretty sick in my book. I am not a doctor...but I was a nurse. I hope that you decided to take her to be evaluated in the ER...her oxygenation is a bit too low to just watch at home without equipment to monitor her. If you are still home, push for an admission or at least a thorough examination complete with an xray and lab work.
You aren't over reacting, you are being a mom! Always go with your gut, don't take no for an answer as far as doctors go. Being a mom my self, I have pushed for treatment for my kids, especially as far as my son who has severe asthma.
I will keep you in my thoughts and prayers, Sunny