Is this as big of a deal as i'm making it?

That's kind of awkward, but it's not like you're doing it on purpose. Your dog wants to be warmer, and you're already asleep so you don't think to kick her out. Nothing about this is you wanting to do creepy things with your dog or anything, so, while you might want to figure out other sleeping arrangements for the pooch, it's not like this is totally terrible...