You're right that the talk from EU about EU sovereignty is about increasing EU involvement, while decreasing US involvement. I don't agree that it's a misleading term: both "EU sovereignty" (EU independence from the US) and "EU member state sovereignty" (member state independence from the EU) are both valid uses of the term "sovereignty".

EDIT because I wanted to add some more thoughts: "Sovereignty" means "supreme power or authority". It is valid to say "EU member states should have the ultimate supreme authority and not be subservient to the EU". It is also valid to say "the EU (as in all the EU member states) should have the ultimate supreme authority and not be subservient to the US". The two ideas are not even in conflict with each other. If you think EU member states should be completely sovereign, you can still find it valuable to have EU-wide sovereignty initiatives which decrease the US's authority over EU member states.

There are two ways "EU sovereignty" can be read. One is "the EU and its member states should have the supreme authority over themselves and not be controlled by the US". The other is "the political body known as 'the EU' should have the supreme authority over its member states". I don't think these sovereignty initiatives are meant to be read as the latter.