Answers:
First: No, you should not feel embarrassed. You'd be amazed at the patchy records admissions offices see. They have a variety of measures to work with for that very reason. Some very capable students have particular irregularities, such as dropping out because you can't afford the tuition, or having a semester of incompletes due to illness, or whatever, that means your record needs personal attention. With good enough scores in other areas, such as letters of recommendation and the record of jobs you had when you had to work, you will probably be considered a serious candidate.
Much of the transfer material is based on the quality of the school from which it transfers, together with the record of grades scored. That is, a 3.41 from a demanding school is quite a good record, while the same GPA from an easy grading half-baked school would not impress.
Also, the reason for the transfer matters. If you were doing well but the school was too small for you (a two-year school where you want a bachelor's degree), ran out of things it could teach you in your specialty (music is one of the special ones anyway, because of the strength of the audition), or was generally not much regarded in the field; all that is fine. But if it was because you were having personality conflicts with the instructors, or you were getting reports for missing rehearsals and so on, that's not going to help matters. I will assume it was for good reasons.
But the short answer is no, you will not be compared to newly enrolling high school graduates. You will be compared to other transfer students, and to other students already enrolled in the School of Music at your level. If all your credits transfer, you would be a sophomore, so you'd be compared with the already enrolled sophomores.