Like many others, your expectations were substantially too high, and it is good that you are still safe, with just a wakeup scare. Going 85 in narrow lanes a construction zone with lots of high speed truck traffic while painting your toe nails ... is definitely not recommended.
The extra cars displayed "up front" are generally detected by the front camera, and possibly the radar, and neither can see anything to the side of the car. So, for the most part, those "extra" cars are only quite noticably ahead of your car.
Safety in handling both speed and steering during merging and in lane changing are totally your responsibility. The AS will try to help with lane changing, but the sensors are only able to detect very nearby vehicles, not nearly enough to insure safe lane changing.
The TACC and AS do not appear to have sufficient capabilities or programming to handle traffic merging from the side, so best for you to resume total control in the merging-traffic situation. Left in TACC mode, the car can speed up or slow down at just the wrong moment, as if you are actively trying to block another car which is trying to merge. If possible, travel at least one lane in from the merging lane of the freeway or highway.
AS is really an SA, or Steering Assist, that is still in Beta development. It is NOT hands-off Automatic Steering, even though some claim that it SHOULD be. When you use AS as an aid, keep both hands on the steering wheel, ready to correct the AS at any instant. For safety, be extra vigilant as you learn the situations where AS might have trouble, or get confused. And, be prepared to handle the rare but occasional unexpected situation where the AS gets "confused", even when the car is in a situation that seems totally normal to you. Think of it as an unexpected software crash that could happen at any moment. Sure, if the AS software was operating normally, it would not have swerved into ... whatever, but possibly it was not operating normally, due to some unknown timing glitch.
But, it is your life, and your car. To me, both are valuable. Tesla has multiple warnings to keep both hands on the wheel, so quite possibly they know something about AP that you do not know. So, from personal experience with AS suddenly "going wacko" just a very few times when there was no apparent reason for the sudden steering lane departure or lack of braking, I STRONGLY recommend being alert, and keep both hands on the steering wheel to be able to feel the small movements of the steering wheel, to be able to sense trouble early and take control instantly when the AS has some unexpected difficulty.
Perhaps it is better to think of AS as a young child sitting in your lap trying to steer. You should keep your hands on the wheel to feel everying that the child is trying to do, being ready to resist and correct any poor choices. How are you trained to react when another vehicle tries to cut you off, or actually crash into you?
In an exit-only lane, where the lane angles away from the highway, typically with a painted triangle, the AS seems to be confused by the angle, expecting to deal with steering through highway curves perhaps, and the AS has been observed (4 times by me) to drive into the triangle, toward the crash barrels.
What software revision does your car have, possibly 2.16.17?
Look on the popup screen that appears when you touch the Tesla icon at the top center of the 17" touchscreen. The odometer might also be there. Please go safely, and enjoy your rather heavy new car.
